Filta Group Articles

Anyone looking to start up a business has probably at least considered the option of entering into a franchise arrangement with an already existing brand.  If you are one of the many out there who are looking to explore available business options, but don’t know where to look first, then you probably have a lot of questions regarding just what franchising is all about.  Understanding a few basic concepts about franchising can help you make an informed decision about your business options that is right for you.
First and foremost, let’s take a look at just what it is that is meant by franchising.  When someone starts a franchise they pay for the use of an already existing brand name, product or service and business model.  The company who has ownership of the existing patents on the brand name, product, service, etc. is referred to as the franchisor.  The individual paying for use of these patents is the franchisee.  The franchisee usually pays the franchisor a one-time start-up fee as well as ongoing royalty fees for use of the franchisors patented names, goods, services, etc.
To get a clear understanding of just what a franchise really is, one needs only think about some of the most popular fast-food chains, grocers and motels.  McDonalds, Wal-Mart and Super 8 are all examples of businesses that are owned by individual investors but which operate under brand names controlled by franchisors.  The very success of those entities listed above should shed some light onto why franchising is such an appealing option for people looking to start up a business.
There are a number of advantages that come along with franchising that are not available to those who chose to go into business for themselves on an independent basis.  Franchisees enjoy the benefit of brand recognition, meaning that the public is generally already aware of what the franchisee’s business will be offering and often already have a positive view of the business.  Independent business owners, on the other hand, have to work very hard over a number of years to establish that same level of trust with their customer base.
Franchisees also have the benefit of being able to work under a business plan that has already been proven to be effective.  This eliminates a lot of the trial-and-error inherent in business ownership and can save the franchisee from making costly, even fatal (for the business) mistakes.  In many ways, a new franchisee starts his or her business with an accumulated level of experience as if he or she had already been running the business for many years.
However, there is a cost for these benefits.  Franchises are generally more expensive to start-up than their comparably sized independent counterparts.  This is because, on top of the regular costs of finding location, purchasing supplies, etc., the franchisee must also pay a franchising fee to the franchisor.  Franchisees must also give over a percentage of their revenue to the franchisor as a royalty fee for use of the franchisors name and other patented aspects.  The franchisee may also be contractually obligated to pay regular fees for advertising and other services by the franchisor, regardless of whether the franchisee feels that those services are beneficial or useful.