What is Franchising?

Franchising is a method of distributing goods or services to consumers. The franchise system owns the right to the trade-mark of the business. The franchisee purchases the right to use the trademark and operating system.

Most people associate the word "franchise" with fast food restaurants. But there are many more types of franchise businesses, including everything from advertising to automobile repair, printing services to party supplies, and many more.

• There are an estimated 1,500 franchise companies operating in the U.S. doing business through more than 320,000 retail units.

• 75 industries use franchising to distribute goods and services to consumers.

• Average initial investment level for nearly 8 out of 10 franchises, excluding real estate, is less than $250,000.

• Annual U.S. retail franchise sales in 2000- 1 trillion

• The franchise industry accounts for 40% of all retail sales in the US

• Approximately one out of every 12 businesses in the U.S. is a franchise business

• Government studies have indicated that up to 77% of all independent businesses close their doors within 5 years of opening, while only 8% of franchises close in the same time period.

• A 1992 Gallup survey indicated that 94 percent of franchise owners considered themselves to be successful, and 75 percent would repeat their franchise again.

• In a study by Arthur Anderson & Company of 366 franchise companies, nearly 97% were still in business after 5 years.

• In contrast, a study by the U.S. Small Business Administration revealed that 62.2% of all new businesses failed within their first 6 years of business.

According to the U.S. Department of Commerce

• 90% of franchise businesses are still operating after 10 years, whereas 82% of independent businesses have failed.

• Although only 8% of businesses are franchises, they represent 40% of all retail sales in the U.S.

• Consumers prefer a nationally recognized name 2 to 1.

• Proven methods are often better than trial and error.

• A franchise is usually easier to sell and has a higher value than an independent business.

• The synergy of a group of people, all contributing ideas and motivation, is a benefit to each individual.