An important step in the small
business start-up process is deciding whether or not to go into
business at all. Each year, thousands of potential entrepreneurs
are faced with this difficult decision. Because of the risk and
work involved in starting a new business, many new entrepreneurs
choose franchising as an alternative to starting a new, independent
business from scratch.
One of the biggest mistakes you can make
is to hurry into business, so it's important to understand your
reasons for going into business, and to determine if owning a business
is right for you.
If you are concerned about the risk involved in a new, independent
business venture, then franchising may be the best business option
for you. But remember that hard work, dedication, and sacrifice
are essential to the success of any business venture, including
franchising.
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A franchise is a legal and commercial
relationship between the owner of a trademark, service mark, trade
name, or advertising symbol and an individual or group 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.
Franchising is based on mutual trust between the franchisor and
franchisee. The franchisor provides the business expertise (marketing
plans, management guidance, financing assistance, site location,
training, etc.) that otherwise would not be available to the franchisee.
The franchisees brings to the franchise operation the entrepreneurial
spirit and drive necessary to make the franchise a success.
There are primarily two forms of franchising:
- Product/trade name franchising and
- Business format franchising.
In the simplest form, a franchisor owns the right to the name or
trademark and sells that right to a franchisee. This is known as
"product/trade name franchising." The more complex form,
"business format franchising," involves a broader ongoing
relationship between the two parties. Business format franchises
often provide a full range of services, including site selection,
training, product supply, marketing plans, and even assistance in
obtaining financing.
To learn more about:
- The advantages and disadvantages of franchising,
- The franchisor's responsibilities,
- What is contained in a franchise packet, and
- Understanding the franchise contract,
Read SBA's "Is Franchising for Me?" Workbook (.pdf file)
Franchise Registry
Franchise Directories & Evaluation
For additional information:
Consumer Guide to Buying a Franchise
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