Are you thinking about buying into a Franchise, but not sure exactly what it entails? To get an exact picture of a Franchise you might recall the Eddie Murphy movie “Coming To America” where Eddie worked as an employee under the golden arches of McDowells. The funny thing about this Franchise was that it operated without the consent of the would-be Franchiser McDonalds.
A guy hired to take pictures, of this particular fast food Franchise, for proof in a probable lawsuit was driven away by Mr. McDowell in one part of the movie. Everything about McDowells, food & drinks included, was the same as McDonalds. The only difference being that all the names were changed and even the names had a familiar tone of reference to the original.
This is not uncommon amongst the circle of Franchisees. As long as they can hide under name changes they will to avoid paying fees to the Franchiser. If a Franchiser establishes proof that a business is using their name, or similarities of their name and products, without permission the Franchisee will most likely be sued in court.
A Franchise is all about buying into an established business. It can be a business that sells fast food, groceries, clothing, prescription eyeglasses, office supplies, gas, beauty products, and the list goes on. As the Franchisee, you must obtain a permit or license from the Franchiser. The Franchiser is the person who started and created the popular business you would like to get a piece of.
Franchises don’t come cheap. Whatever service or product you are undertaking to sell you will have to pay the piper. Royalties, set fees, building rent, and fees from leasing equipment are typical costs you are likely to encounter when striking a deal with the Franchiser.
The main thing behind a Franchise is the name. Everyone buys brand names, but many are skeptical about buying a product name they are unfamiliar with. Established store brand name products people will buy, often over big advertised brands. So in buying a name people already know and love your losses of failure are cut in half.
However, your profit earning potential will be diminished since you’ll be sharing them with the franchiser and you won’t have the independence or freedom starting a business from scratch would offer. When looking into a Franchise three flavors stand out.
The first is called a Turnkey Operation.
When entering into this kind of Franchise you will find everything ready to go. Its’ like driving a new care off the lot. All you have to do is put the key in the ignition and turn. The Franchiser has done all the work for you. The building, employees, and products are all furnished. The Franchiser will remain in charge of marketing and sales decisions. You simply follow their orders.
The second is called a Trade-Name Franchise.
The Franchiser lets you sell products they manufacture in a designated area, with full exclusive rights, along with guidelines of operation set for the franchisee to follow.
The third is called a Business-Format Franchise.
The Franchisee does all the grunt work from building the store, making the product, and selling it. Quality instructions and marketing techniques is all the Franchiser in this case will do to get you started.