What is a Franchise?

Everywhere you look, you see franchises. You see franchised restaurants, clothing stores, entertainment venues. And if you need your lawn cut, you can probably find a service franchise that does that. But what is a franchise? Where did these businesses come from? Are you a candidate for buying a franchise?

Franchising began in the 1950's. Ray Kroc, of McDonald's fame, made quite the reputation as a smart franchisor. Thanks to franchising his recipes and business systems to folks that wanted to be self-employed, but lacked an idea and business system of their own, he was able to grant protected territories, add locations and make millions of burgers each year. Due to his great operating systems and standards, he built a great brand fast. Mr. Kroc also created the American standard in teenage employment; giving teenagers a stepping stone from high school to business. It was greasy, but sure beat a paper route! Colonel Sanders was a successful franchisor and became the country's largest chick peddler via the franchise model.

In a nutshell, like the stories above, a franchise starts (or SHOULD start) with an industry expert. Be careful of those that I call "professional franchisors" that create brands in industries in which they have little or no expertise. These are oftentimes nothing more than sales companies that are designed to (and rely on) sell lots of equipment, tenant improvements (construction of the storefront), etc. This leaves their franchise buyers broke after paying such large initial franchise fees. Without "back end" franchise support, these buyers usually go broke in their beautiful stores, vans, shops, etc. - having fallen prey to lots of flash up front with little or no franchise training or franchise support after opening.

Most successful franchisees give credit to their franchisors - IF - they have provided excellent up-front franchise training, on-going franchise support and charge a fair initial franchise fee and monthly franchise royalty. Franchise support is the key to service franchises to be sure. There may be a few restaurant or food brands that can eek along based on a logo, a good location and an astute franchisee but even those entire brands can fall to the gravitational pull of the pitfalls of poor franchise support from the franchisor.

Happy franchisees usually point to regular, consistent communication with skilled consultants on the franchise brands' franchise support team as the reason they are successful. If a franchise comes with less than this, you might reconsider.

Franchising, simplified, should look like it did when Ray Kroc and Colonel Sanders were spearheading the franchise model of doing business.


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