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9.0 Franchises Research Report 9.0 Franchising Franchising is a system of distributing a product or delivering a service in return for a fee. The company that manufactures the product or originally developed the service and that appoints others to use its name and sell the products or service is called the "franchisor". The person that contracts with the franchisor and is granted the right to market the goods or services, according to the franchisor's established practices and upon paying franchise fees, is called the "franchisee". Franchising can be an attractive alternative if you are interested in starting a business. Advantages and Disadvantages of Franchises There are many benefits for franchisees. Buying a franchise allows you to acquire an interest in an established business, usually with a recognized name and the benefit of national advertising. Franchisors usually provide training and purchasing benefits not normally available to independent small businesses. Often, the franchisor will grant the franchisee the right to use a recognized trademark and will advertise it nationally. On the other hand, a franchise business takes a high degree of personal involvement by the franchisee. The franchisee is also restricted in many ways because he or she will be subject to the dictates of the franchisor in terms of many facets of the operation of the business. The franchisee may define opening and closing times, product standards, service standards, warranty standards and place restrictions on the franchisee's territory and ability to sell the business. While success will depend in large part upon the abilities of the franchisee, the most important factor is usually the size of the market or value of the service developed by the franchisor. Considerations for Franchisees If you are considering buying a franchise, use great caution. Make sure that you carefully read the circular provided by the franchisor. Also, carefully review the proposed franchise agreement. Are you provided a territory exclusively so that new franchises can't take your business? Must you participate actively in the business or can you be an "absentee owner"? Can you transfer the franchise to someone else? What are the conditions for terminating and renewing the agreement? Does the franchisor have a recognized, protected trademark that you can use? Talk to other franchisees about the pros and cons of the business and what it is like to deal with the franchisor. Be particularly wary of promises of great earnings. Resources There is a great deal of information available about franchises in government and private publications. For example, the Franchise Opportunities Handbook includes an annual survey of about 900 franchisors regarding number of outlets, time in business, costs, financing and training. There is a charge for this publication. Call (202) 783-3238, or write: Superintendent of Documents U.S. Government Printing Office 710 North Capital Street North West Washington, D.C. 20402 You may also want to review the Franchising Directory. Call (213) 477-1011, or write: Entrepreneur 3211 Pontius Avenue Los Angeles, CA 90014 Pilot Books publishes several franchising related titles. Call them at (516) 422-2225, or write: Pilot Books 103 Cooper Street Babylon, NY 11702