Buying a franchise is one option for someone looking to start his own small business. With a franchise, you follow established procedures that have proven to be successful for other franchise owners. In return, you agree to follow these procedures, which may allow little opportunity for creativity--a drawback for some entrepreneurs.
Franchises accounted for about 40 percent of sales by all United States businesses as of 2010, according to the Franchise Solutions website. About one out of every 12 retail businesses is a franchise, according to the International Franchise Association. Examples of franchises in the Houston area include McDonald's, All Tune and Lube auto care centers and Anytime Fitness health clubs.
For the entrepreneur, a franchise can offer a number of benefits. As a franchisee--the entity that purchases the franchise--you'll gain access to a successful business model to follow and use of an established brand, which eliminates much of the trial and error associated with implementing a unique business idea. You'll also receive support and training in areas, such as staffing, marketing and financing. This can be especially helpful if your business experience is limited.
To start a franchise, you'll need to pay the franchisor an initial fee to obtain the rights. This can range from a few thousand dollars to $100,000 or more, depending on the franchise you choose. You'll also have to pay regular royalties to the franchisor, which are usually calculated as a percentage of your unit's gross sales. Although the franchsor can help you arrange financing, you'll still need to qualify for a loan on your own.
Some people may associate franchises mainly with the food business, such as fast food establishments and chain restaurants. However, franchises run the gamut of the business world and can include businesses such as auto care shops and cleaning services. Franchises can even be home-based, such as the ones listed on the Entrepreneur website (See Resources).
If your idea of owning a business includes total control of the operation, then a franchise may not be for you. As a franchisee, you will be expected to follow corporate guidelines regarding operations, marketing, product selection and pricing. You will also be required to enter into a formal franchise agreement that spells out exactly what you can and cannot do.