Buying a Franchise…is it for me?

If you are receiving this article chances are you have recently thought about starting or buying a business. As you probably have figured out by now, the first step in the decision-making process is to decide whether or not to go into business at all. Each year, thousands of potential entrepreneurs in the Midwest are faced with this difficult decision and ABMI has the pleasure of working with many of them. One of the biggest mistakes you can make is to rush your decision and hurry into business, so it's important to understand your reasons for going into business, and to determine if owning a business is right for you.

According to the Small Business Administration (SBA), due to the inherent risk and work involved in starting a new business, many new entrepreneurs choose franchising as an alternative to starting a new, independent business from scratch.

If you are concerned about the risk involved in a new, independent business venture, then franchising may be the best business option for you. But remember that hard work, dedication, and sacrifice are essential to the success of any business venture, including franchising.

The SBA offers a great resource to help you sort through the pros and cons of buying a franchise and decide if it is a good alternative to buying an existing independently operated business. The resource is titled “Is franchising for me workbook” and is a free publication available at this link.
http://www.sba.gov/opc/pubs/fran.pdf

Additional information about franchising is available at our website www.abmi.net.

The History of Franchising
The concept of franchising has been around for decades. Franchising began to attract widespread market attention with the evolution of the McDonalds franchise system which was started by Ray Kroc in 1955. Since the opening of the first McDonalds in Des Plaines, Illinois, franchising has continued to gain popularity.

Franchising is one of the most popular systems for growing a business in the United States today. According to a recent government survey, franchising has experienced explosive growth since the mid-70s and is expected to continue phenomenal growth into the future. Here are a few facts about franchises:

• In the United States , there are over 2,500 franchise systems.
• These systems have in excess of 534,000 franchise units, which represent 3.2% of the total businesses in the United States .
• Franchises represent over 35% of all retail and service revenue in the U.S. economy.
• More than 7 million people work for owners of franchised businesses.
• More and more people are making the decision to get involved with a franchise company with the hope of pursuing the American dream of business ownership.
  

An Overview of the Franchise Concept

The concept of franchising is simple. It is a method of duplicating successful business processes and building on systems proven to be effective for acquiring and keeping customers. Through replication of systems and processes within a franchise, a certain level of consistent performance can be achieved. This consistency helps to build a positive and reliable image in the minds of current and future customers which tends to provide franchise operators the luxury of quicker increases in sales as compared to non-franchise counterparts.

Benefits to Franchise Ownership

In addition to enjoying a quicker ramp-up in sales on the average, franchises offer other significant advantages over other entrepreneurial options.

Training
Most franchises offer extensive training for the franchise owner. This training is usually provided as an initial structure program (including a standard classroom-type format at the corporate location), and ongoing training through formal or informal methods. Training material often includes step-by-step guidelines for how to conduct every part of the business. Forms and other tools are usually provided to give the new franchise owner a clear roadmap toward replicating the successful process.

Leveraged Purchasing Power/ Performance Tracking

As a member of a larger organization of franchise owners, franchises typically have benefits associate with larger volume discounts with regard to buying goods or services. Performance metrics are normally provided by the Franchisor to provide franchise operators with benchmarks from which to gauge individual performance, and access to best-in-class ideas to help refine the operating performance.