Question

Why franchising is considered a major force in our economy? What factors would you consider if you are thinking of starting a new franchise business in the healthy fast food industry in your city or town?

Answer 1

Franchising is considered a major force in our economy because:

Franchising is a major driver of economic growth in the United States. Providing products and services in more than 300 categories, including a myriad of retail concepts, the franchise industry is a significant contributor to the country’s gross domestic product (GDP) and job market.

Big Producer
Franchise businesses produced goods and services worth $868.1 billion in the United States in 2016 and supplied an annual payroll of $351.1 billion, accounting for 3.4 percent of the private sector gross domestic product, according to an International Franchise Association report. Franchise businesses contributed indirectly to the U.S. economy in other ways, too. According to the report, franchises were the cause of more than 16 million jobs, $723.2 billion of annual payroll and $2.1 trillion of annual output, which ultimately accounted for 7.4 percent of the GDP.

Jobs Creator
Franchising is a significant jobs creator in the United States. One in seven jobs is due to franchising. In 2017, almost 9 million people have jobs thanks to the 801,153 franchise establishments, according to the IFA report.

The following factors I would  consider while starting a new franchise business in the healthy fast food industry in my city or town:
1. How much intellectual stimulation do I need in my work? Although there are a growing number of professional franchises (such as executive coaches and corporate trainers), the vast majority of franchises involve basic retail and service businesses that require little education or sophistication. After all, if a business is complex and cannot be replicated easily, it probably cannot be franchised.

Most franchises want "hands-on" owners-people who not only keep the books and handle the finances but also provide customer service and clean the toilets as well. Depending on the labor market in your area, you may or may not be able to hire employees to do the grunt work.

2. Do I have other priorities in my life? In just about every franchise agreement I've seen, there is a clause requiring you to devote substantially all of your working time to the operation of your franchise. Retailing and restaurant franchises, especially, involve grueling hours on evenings, weekends and holidays

3. How do I feel about dealing with the public? Most franchises involve dealing with the public, and, truth be told, the public can be rude, crude, spoiled rotten, neurotic, shrieking and just downright vicious at times. Will you be able to deal with that without letting it get to you personally?

4. What is the likelihood of my getting a corporate job again? If you are relatively young and have marketable skills in your field, there is a decent chance you will be able to land another corporate job when the economy improves, probably in another year or two.or three.

5. How do I feel about being stuck in one place? When you buy a franchise, you are limited to a territory and are forbidden from opening units or even advertising outside that territory. In short, you are stuck in one place. You better make sure it's a place you know well.

6. What are the total costs of this franchise? A good franchise will give you a chart or table showing exactly what costs you should incur to start and run your franchise during the first year or two. If the franchise's UFOC does not clearly spell this out, ask them to do so.

7. Is there enough of a track record to know if the fundamental business model works? Years ago, a company did not consider franchising until it had many outlets operating in different parts of the country. Today it is not uncommon for a fledgling company to begin franchising with only two or three outlets located in the same area. Just because the franchise concept plays well in California doesn't mean it will play well on the East Coast, and vice versa.

8. Does the franchise's management know what it's doing? If the UFOC for a franchise does not contain detailed resumes for each of the key managers, you should insist on seeing these. You are looking to work with people with many, many years of experience in the business so that when the tough times hit (as they inevitably do) there's a good chance they will figure out solutions to keep you successful.

9. Is my territory the right one for this franchise? A number of "specialty store" franchises I've seen recently base their track records on the concept's success in Europe. There's just one problem. Europeans travel more by public transportation, shop much more on foot, and buy products in several different specialty shops. Americans go everywhere in cars, shop in large stores such as Costco and Wal-Mart, and want to keep the number of separate store visits to an absolute minimum.

10. What are your plans for future expansion, and will the franchise system be included in them? Most franchises are reluctant to promise that they will never, ever compete with their franchisees, because they don't really know what competitive and market pressures will force them to do in the future