You are doing what!?  That is the question we heard most when we told our friends and family that we were franchising Shear Madness Haircuts for Kids.  What is franchising?  Are you MAD?  It was obvious that though there are franchises every where we do business, that most people have no idea what a franchise is.

A franchise is a business model.  When a business owner decides to expand his business he has options.  One of those options is to franchise.  Franchising allows others to own their own company yet use the name, logo, and systems of the franchise business owner (the franchisor).

A franchisee uses his own funds, has the full responsibility of the success or failure of his own company yet has the following advantages:

1. He doesn't not have to come up with his own YOU-nique business idea.

2. He can use the systems that have already been developed and used successfully by another shortening the learning curve.

3. He gets "Super Natural Support" & training with a business partner who knows and cares about the success of his new business.

4. If the franchise system is progressive, he does not have to worry about "the Ongoing Labwork" needed to develop the concept further and keeping up with trends as the franchisor will worry about that for him.

5. National advertising is done for him.

6. As the system grows the name brand recognition grows without the franchisee having to open more locations himself.

7. When a franchisee is ready to sell his business he has a partner in this process and a recognizable asset to sell.

What does the franchisor get?

1. The franchisee pays the franchisor an initial franchise fee for the training, systems, logos, etc. of the franchised business.

2. The franchisee pays an ongoing royalty - which is usually a percentage of sales for the continuing developments of the franchise and ongoing support of the franchisor.

3. Many times the franchisee contributes to a National Advertising Fund a percentage of sales for advertising that benefits all businesses within the franchise system, saving

Why would a Business choose franchising as a way to grow?

1. Many times a business can grow faster using the franchise method instead of the company owned store model.

2. The franchisor does not have the added responsibility of additional payroll as they do not pay the franchisee as they would an employee.

3. Training may be the forte of the franchisor and they enjoy watching others succeed using their concept.

4. A franchisor does not use his own capital to grow the brand.

There are many businesses out there that are franchises.  They come in all shapes and sizes!  Some are brick and mortar store fronts as in McDonalds, Muscle Max, and Shear Madness Haircuts for Kids.  Others can be consulting type operations that either have offices or are home bases businesses.  There are business coaching franchises, as well as child safety ones.  There are home construction, repair, and maintenance franchises as well.

Even though the types of franchises may be different what they all have in common is the Franchise Fee. 

When you decide that you want to open one a franchise business you pay the franchisor a franchise fee.  This fee gives you the rights to use the logos, systems, and name of the company as your own name.  It also entitles you to be trained in their way of doing things – the systems that will contribute to your success and shorten your learning curve!

In doing your research you will discover that this franchise fee should benefit you in many ways:

• The franchisor has spent years perfecting the systems of the business.  If you follow them you will save years of time and boatloads of money discovering these on your own.

• This fee gets you a built in partner as well as a business coach.  They have done everything you are doing before and can hold your hand as you walk through it.

• The business already has a big head start on being well known.  Your advertising dollars will go further and easier than having to build this name recognition on your own.  The more franchise and corporate units there are the better for everyone in the system.

• Having others doing the same thing that you are doing in different areas allows you to discuss new ideas and failures to aid in everyone’s business success.

• The concept, logos, artwork, and ongoing developments are done by the franchisor; you should be able to grow along with them without doing this work yourself.

What does the franchisor do with the franchise fee?  Many have the misconception that this fee is all gravy for the franchisor.  There are many expenses a franchisor has that a normal business owner does not have.  Some of these expenses are:

• Training Programs, operating and preopening manuals.

• Commissions paid on franchise fees collected – if you are using a broker to find a franchise the broker can receive from 30 up to 80% of the franchise fee as commission.

• Franchise portal and listing fees of hundreds to thousands per month.

• Legal expenses that occur every year to update the Franchise Disclosure Document, annual registration fees, etc.

• Accounting fees to have financial statements audited annually.

That fee goes quickly!  But in the end it benefits you the franchise buyer more that it benefits the franchisor.