To the untrained eye, franchise and business opportunity investments look pretty much the same. Both invite you to purchase a package of goods and services and business concepts. Both offer you the chance to capitalize on a business idea that has already proved to be successful. Both provide some training, handholding and access to a valuable marketplace.
In reality, though, there are huge differences between the two concepts. While these fundamental distinctions sometimes appear subtle, detecting and understanding them can help you protect yourself when you take the plunge into your new business.
If there's one telltale difference between a franchise and a business opportunity, it's the role of a trademark. The licensing of trademark rights is a hallmark of franchising: Every franchisee of a McDonald's, Subway or Holiday Inn is operating under a trademark license. The consistent image portrayed by these and other franchise systems symbolizes their strength in the marketplace, and is the direct result of a trademark license. If a program grants you the right to operate under a trademark owned by the seller, you're most likely looking at a franchise rather than a business opportunity.
Never underestimate the value of that trademark. The well-known marks of franchises like Burger King or Pizza Hut are powerful consumer magnets. This magnetism is created and maintained by years of national advertising-we've grown up with these brand names. The power of a franchise trademark is that it promises consumers constancy. When someone pulls off a road at the sight of a trademark on a sign, he or she knows exactly what to expect. Consequently, weaker marks, such as those of a new franchise system or those new to your area, don't have that same marketplace pull and won't be as valuable to the franchisee.
Franchises also put an emphasis on training and ongoing assistance in the operation of the business. The appeal of franchising-being in business for yourself but not by yourself-is rooted in the know-how and services supplied by the franchisor throughout a long, supportive business relationship. On the other hand, most business opportunity sellers offer self-contained programs with some instruction (often recorded) and little or no ongoing business support.
Another distinction between franchises and business opportunities is the cost. A retail franchise program can involve initial fees of $30,000 or more with a total business investment of $50,000 and up. In contrast, most business opportunity purchase prices are low enough to be put on a credit card, running from a few hundred to a few thousand dollars.
Nearly all of the company's restaurants are operated by franchisees. Moe’s is a business format franchise and is available for single-location or multiple-location deals. The franchise fee for a single-location deal is $30,000 non-refundable. In order to open a store location, a franchise is expected to have $200,000 in liquid capital and $600,000 in total assets. Moe’s Southwest Grill, a 2007 Top Ten Growth Chain according to Restaurant Hospitality and Technomic, is prepared for vigorous franchise growth.
3-33. While franchise owners must have at least $125,000 of cash available, average startup costs are more then double this amount. What are the most likely sources of funding a franchise?
Moore, L 1997, The Flight to Franchising, US News & World Report. June 10, pp. 78-81.
• The franchisees would have to raise approximately $750,000 of outside financing to fund the venture
Know your market and competitors before starting your business. Effective research and strategic planning are often what separate the winners from the losers.
The purpose of the following paper is to be able to inform the reader(s) of the paper about the business goals of the ownership and operations of a Sports Bar Franchise. The topics of discussion will include the description of the goal of the business and subtopics of the types of goods and services that are provided by any Sports Bar Franchise, what types of customers will this business attract, and lastly, how and where the specified services are made available. The paper will also include dialogue about the strengths and weaknesses of an assorted of business organizations and which one would be most appropriate for the author’s business venture.
According to Wheelen & Hunger (2010), Panera management believed that its specialty bakery-café concept had significant growth potential, which it hoped to realize through a combination of owned, franchised, and joint venture-operated stores. Franchising was a key component of the company’s growth strategy. (p. 29-10).
Philip Lief Group and Lynie Arden. 220 Best Franchises to Buy: The Essential Sourcebook For Evaluating the Best Franchise Opportunities. New York, NY: Random House, 2000. Print.
7-Eleven focuses on teamwork and encourages all franchisees to train every employee to be a leader instead of a follower. As an employee in 7-Eleven, I have been always told to dream as if one day I would be franchisee of a 7-Eleven store. One other thing the corporate tells the owners to look at is hire someone who would become a franchisee one day. Managers are expected to give out extrinsic rewards, and be a charismatic leader.
Another strength is Burger King’s franchise development having 90% of its restaurants franchised. The franchise concept allowed the company to grow with minimal capital expenditure and receive royalties and fees. Burger King went above and beyond and created a new model of its restaurant to attract mo...
Not having to answer to a corporate boss is the dream of many and the flexibility that owning a business franchise creates provides this option. Success is not reached by simply creating a business, however. The level of success is measured by the size and efficiency of the business. Business growth is the driving force of the economy. The additional jobs and revenues created when a business expands allow the economy to grow at exponential rates. One of the fastest and most popular ways to increase the size of a business is to turn it into a franchise, which can then be purchased by individuals. Franchising provides opportunities that are beneficial to both the parent company and the purchaser. The company that owns the business can expand without having to pay such a large initial cost to open a new store since the franchise purchaser pays a cost to open the business. As well, the company can regulate many of the business activities so that there is a sense of consistency throughout all of the locations. The purchaser is allowed to use the trademarks and goods of the franchise which already have a large market presence. As well, they are provided with training and work standards by the company to help their business run smoothly (Kalnins & Lafontaine, 2004, p.761). Looking at the business model of the world’s largest food retailer, McDonald’s, provides great insight into franchising and business growth in general as well a better understanding of a global business that utilizes the franchising technique.
People move away from their extended families, and traditions can fade, which is why it is important to have a trademark that easily identifies your ...
Manufacturing Franchise: These types of franchises provide an organization with the right to manufacture a product and sell it to the public, using the franchisor’s name and trademark. This type of franchise if found most often in the food and beverage industry. Most bottlers of soft drinks receive a franchise from a company and must use its ingredients to produce, bottle, and distribute the soft drinks.
The first step in any business is to think of or create a business idea. Without an idea, one cannot launch their business off the ground. A right direction is needed to create a business with a unique idea. However, other options include franchising or buying an existing business (1). Franchising allows an individual to run stores such as Burger King or McDonalds under the corporate name. It involves taking training classes and a heap of money in order to start a franchise. A Franchisee will have to buy products and services from the corporate entity they are franchising from, which is often required. Buying a franchise is like taking a piece of the pie from the company that is franchising and sharing that pie with everybody else. In addition having a franchise allows one to communicate and in essence become a big part of an added business opportunity (4). Franchising is far from easy to start and maintain for that matter. Starting a franchise involves a l...
A franchise is simply investing money in a location or store, and then having the store become your own business after learning how to manage the entire business. You earn the majority of the profits, and you also don't have to worry about operations. You'll be taught by the company on how it run the entire business, and this is the reason why this is a huge and very easy way to become rich. Franchises require quite a hefty investment depending on the business you plan to buy. However, if the business is in high demand, there is profits to be made. Take for exMple the Cold Stone Creamery business. Countless people purchase one of their many franchises. The money is very good, the opportunities are endless, and the fact that there is no more need for advertising is what makes this more worth the investment in the long