Why are Franchises profitable and should you Invest in a Franchise?

September 26th, 2010 | Author: Cash Man

If you are looking to invest into franchise opportunities, you need to understand what a franchise is and what the different types of franchises are. A franchise is when a company grants an individual or group the right to market goods or services in a set location or territory. The franchisee in this equation is the individual or group of people and the business allowing the person or group to utilize the business’ trademark and name is referred to as the franchisor. Some of the most popular franchises today are McDonald’s, Subway, Pizza Hut, 7-11, the UPS Store, Hampton Inn and Suites, Supercuts, and H.R. Block. Franchises are not limited to fast food restaurants, but include a wide variety of business models. A franchise can vary in cost greatly, from $3000 to $1 million or more.

The Perks of Being a Franchisor
When a company grants a franchise of their business model and the use of their trademarks, training, etc, they are paid a royalty fee and a percentage of the franchise’s gross monthly sales. A franchisor also has the benefit of more locations, without the headache of having to personally manage each one. The franchisor also benefits from the enthusiasm of the franchisees, who are often very determined to succeed with their new franchise.

The Perks of Being a Franchisee
The franchisee in the arrangement also enjoys a great deal of benefits such as brand recognition and often years of experience. The franchisee benefits from the proven results and know-how of the franchise, because they don’t need to learn everything on their own. Buying a franchise is also a lot easier than developing a new business model and plan and franchises often come with a great deal of training and support from the franchisor. People who buy a franchise can also profit from the national, regional, and local ad campaigns run by the franchisor. Franchisees often have an easy time finding financing because banks and other institutions are less skeptical of a business plan that has already worked in other locations.

Kinds of Franchises
A franchise for sale will usually fit into one of the following categories:

* Event Franchises – Meetings and other events, (such as forums, conventions, summits, and symposiums), are duplicated and exported to other sites.
* Social Franchises – This type of franchise can range from small scale and inexpensive, (such as a candle making business), to very large and expensive, (like a hotel or hospital).
* Business Format – Give the franchisee not only the right to utilize the trademark of the company, but the business model as well.
* Product Format – Distribution rights are granted to the franchisee for goods bearing the franchisor’s trademark.
*Manufacturing Franchises – A franchisor grants a manufacturer the right to produce their trademarked merchandise.
* Business Opportunity Ventures – A business owner buys and distributes the merchandise of a franchisor.

FranchiseLeader.com is the leading online directory of franchises for sale. Search popular franchise opportunities as well as find franchise resales. Start a new franchise, or find an established franchise for sale. Get FREE franchise information today!

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