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What Is Franchising

Franchising is a way to grow your business that lets you sell your knowledge, experience, and concept to dedicated individuals who put up the money to open and operate new franchise locations. Franchising will let you expand with less overhead and fewer day-to-day operating headaches, while the franchise buyers pay you upfront franchise fees and ongoing royalties forever.

Franchising has expanded to include an ever-widening variety of businesses, products, and industries. Its application to new concepts and emerging industries will only increase in the future.

Franchises are generally known to the public under a well-promoted name like McDonald's® not the names of the individual franchise owners. As a result, the general public may not realize that many businesses are in fact franchises. The first box below depicts 100 well-known franchises; the second box lists 100 relatively unknown franchise companies that have more than 200 franchises each.



Historical Definition
Historically, the word "franchising" meant the granting of a right or privilege to an individual or group. In more recent times it includes business arrangements known as franchises, licenses, dealerships and distributorships, to name a few.

Regulatory Definition
The Federal Trade Commission defines "franchising" as a business relationship in which an individual owner:

1. Uses a Common Name (such as Burger King® or Dunkin' Donuts®);

2. Receives Training/Assistance/Guidance (from the Parent Company);

3. Pays a Fee To the Parent Company ($500 or more within the first six months of operation).

If a business arrangement includes these 3 elements, it's a franchise. It could be called a license, dealership, distributorship, or association but it's still a franchise and must comply with the rules of the Federal Trade Commission and certain state regulatory authorities.

Business Definition
Franchising has been described as:

A method of DISTRIBUTION of goods and services;
A method of MARKETING;
A method of GROWTH;
A method of CAPITAL ACQUISITION;

And increasingly, franchising has become:
A method of EMPLOYMENT.

For a company wishing to expand to other locations, franchising offers the opportunity to have branch locations operated by "dedicated" managers rather than company employees. A franchisee is dedicated because it's their business (operating under the franchisor's name and rules) and they've made an investment. A franchisee will sell more, service customers better, and control costs more tightly than a company employee.

What Franchising is NOT

1. Franchising is not an industry. There is no such thing; over 300 different industries and types of business utilize franchising.

2. Franchising is not a magic show. Franchising is not about selling some franchises. It's about building a company - a serious business venture. A person who franchises their restaurant to others will still be in the restaurant business. They will have to develop new menu items, new promotional programs, new décor concepts, and so forth.

Types of Franchises
Historically, franchises have been generally categorized as "product and trade name" franchises or "business format" franchises. Today, the real difference is that under the "product and trade name" franchise, the franchisor is usually the manufacturer of a product, which it wholesales to the franchisee for resale. Under the "business format" approach, the franchisee is usually not reselling a product manufactured by the franchisor. Under both formats, the franchisee is operating the business according to the franchisor's rules, methods, and systems.

You've probably heard of these franchises:
Allstate
Days Inns
Jeep
Popeyes
Applebee's
Denny's
Jenny Craig
Porsche
Arby's
Domino's Pizza
Jiffy Lube
Prudential
Arthur Murray
Dunkin' Donuts
John Hancock
Quality Inns
Athlete's Foot
Exxon/Mobil
Kentucky Fried Chicken
Radio Shack
A&W Rootbeer
Firestone
Liberty Mutual
Radisson
Bacardi
Ford
Lincoln
Ramada
Baskin-Robbins
General Motors
Major League Baseball
Re-Max
Best Western Hotels
GNC
Manpower
Rolls-Royce
Better Homes & Gardens
Goodyear
Marriott
Roto-Rooter
BF Goodrich
Guinness
Maytag
Sears Roebuck
Blockbuster Video
Haagen-Daaz
McDonald's
7-Eleven
BMW
Hallmark
Mercedes-Benz
7-Up
Budweiser
H&R Block
Metlife
Shell
Buick
Hardee's
Midas
Sheraton
Burger King
Harley-Davidson
Miller Brewing
Stride Rite
Cadillac
Heineken
Mitsubishi
Sunoco
Century 21
Hertz
National Basketball Assn.
Taco Bell
Chevrolet
Hilton
National Car Rental
Texaco
Chrysler
Holiday Inn
National Football League
Toyota
Coca-Cola
Honda
National Hockey League
U-Haul
Coldwell Banker
Howard Johnson's
Pearle Vision
Volkswagen
Comfort Inn
IHOP
Pepperidge Farm
Volvo
Coor's
Jack In The Box
Pepsi-Cola
Wendy's
Dairy Queen
Jaguar
Pizza Hut
Westin


...but you may not have heard of these - each of which has more than 200 franchises
Aaron's Rents
Cruise Planners
Maid To Perfection
Qdoba Grill
AlphaGraphics
Culver's Frozen Custard
Marble Slab Creamery
Red Robin
Americ Inn
Del Taco
Matco Tools
Results Travel
Baja Fresh
El Pollo Loco
Microtel
Rita's Water Ice
Batteries Plus
Embroid Me
Minuteman Press
Round Table Pizza
Beef O'Brady's
Express Personnel
Moe's Southwest Grill
Signs Now
Big O Tires
Fast Frame
Money Mailer
Sign-A-Rama
Boston Pizza
Fastsigns
Mr. Electric
Sir Speedy
Breugger's Bagels
Firehouse Subs
Mr. Rooter
Spherion Staffing
Budget Blinds
First Choice Haircuts
Mr. Transmission
Stanley Steamer
Buffalo Wild Wings
Fox's Pizza Den
Once Upon A Child
Steamatic
Candy Bouquet
Golden Corral
One Hour Heating
Sylvan Learning
Carstar
Great Steak & Potatoe
Pak Mail
Taco John's
Cartridge World
Hollywood Tans
Papa Murphy's
Taco Time
Certa Pro Painters
Home Instead Senior Care
Paul Davis Systems
The Goddard School
Chester's
Huddle House
Perkins Restaurants
The Little Gym
CiCi's Pizza
Hungry Howie's
Pet Supplies Plus
Tropical Smoothie Cafe
Cinnabon
Interim Health Care
PIP
Tuffy Auto Service
Clean Net
Jamba Juice
Pizza Inn
Two Men And A Truck
Comet Cleaners
Jani-King
Planet Beach
Unishippers
Comfort Keepers
Kiwk Kopy
Plato's Closet
Valpak
Cost Cutters
Labor Finders
Play It Again Sports
Village Inn Restaurants
Country Inn
Lady Of America
Post Net
Wild Birds Unlimited
Coverall
Lawn Doctor
Precision Tune
Wing Stop
Cruise One
Maid Bridgade
Proforma
Zaxby's