Is Owning a Franchise Right For You? | Be The Boss

Is Owning a Franchise Right For You?


Mar 11, 2013

Feb 09, 2010 – Franchising Pros and Cons:
Is Franchising Right for You?

by Randall S. Hansen, Ph.D.

If you have any kind of entrepreneurial streak in you, the allure of owning a franchise can be great. Just about any kind of product or service that interests you probably has one of more franchising operations, from fast food (Burger King), to hardware (Ace Hardware Stores) to hotels (Super 8), to repair shops (Meineke Car Care Center), to hair salons (Great Clips Hair Care), to housekeeping services (Maids Home Service), to janitorial services (ServiceMaster Clean), to automotive (Jiffy Lube), to dance and exercise (Jazzercise Inc.), to tax preparation (Jackson Hewitt). Fast food, though, remains the top franchising opportunity. According to the International Franchise Association, the estimated number of franchised locations in the U.S. is almost 400,000 in 75 industries, employing almost 10 million workers. More than 2,500 companies offer franchising opportunities.

But should you start your own business or buy a franchise of an already successful business?

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Some Background into Franchising
What is a franchise? It's a legal and commercial relationship between the owner of a trademark, service mark, brand name, or advertising symbol (the franchisor) and an individual or organization (the franchisee) wishing to use that identification in a business. The franchise governs the method of conducting business between the two parties. Generally, a franchisee sells goods or services supplied by the franchisor or that meet the franchisor's quality standards.

Top 10 Franchises
According to the annual review of the franchise industry by, here are the top 10 franchises for 2008:
7-Eleven, Inc. (convenience store)
Subway (sandwiches, salad)
Dunkin' Donuts (donuts)
Pizza Hut (pizza)
McDonald's (fast food)
Sonic Drive-In (fast food)
KFC (fast food)
InterContinental Hotels Group (lodging)
Jani-King (commercial cleaning)
Domino's Pizza (pizza)
RE/MAX Int'l. Inc. (real estate)
Source: Franchise 500®  
Think of franchising -- or at least the costs of it -- as paying for the work someone else has already done in developing a successful business model, marketing strategy, and superior operations efficiencies.

The popularity of the franchise business model has to do with its proven track record of success and ease in becoming a business owner; however, while the success rate for franchise-owned businesses is significantly higher than for independent businesses, no individual franchise is guaranteed to succeed. That said, nine out of ten franchise owners reported profit in 2002.

Experts state that 40 cents of every retail or service dollar spent by consumers is spent in a franchised business. In 2000, most analysts estimated that franchising companies and their franchisees accounted for $1 trillion in annual U.S. retail sales, with approximately one out of every 12 U.S. retail business establishments is a franchised business. A new franchise business opens every 8 minutes of every business day

Finding a Franchise Right for You
The key to finding a franchise opportunity that is right for you is research -- lots of research. You'll want to first decide how much of an investment you are willing or able to make. Initial fees can range from $1,000 to more than $200,000, and then there are the other typical start-up costs, from real estate to equipment.

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