What is a Franchise?
As we begin,
let's establish a definition of a "Franchise". The International Franchise Association suggests that when one party (usually a corporation) allows another (again, often a corporation) the right to operate a copy of its business in another geographic area. The right will usually include the ability to use the name, logo, and system of business to generate sales and profits. One of the earliest franchisors was the Singer Sewing Machine® Company, which set up dealers shortly after the Civil War to sell and repair its revolutionary machines throughout the country. Shortly after the turn of the century, Coca-Cola® licensed others to manufacture and distribute its wonderful elixir. Ford Motor Company® later set up dealers to sell and service its products. Of course, McDonald's® is an example of how an entrepreneur (Ray Kroc) could take an idea and quickly spread it coast to coast (and eventually around the world) without starting out with millions of dollars in capital. Many companies turn to franchising as a system for expansion because they recognize that they can grow rapidly with a minimum amount of capital and enlist top-notch partners if the company is willing to share the profits. The company that sells licenses to its system is called the franchisor, while those who open their own units are called franchisees.
Franchise, a dynamic business
Franchising has proved to be one of the most dynamic business methods of the past 50 years in the world. The franchise system is spreading rapidly in Romania, with local companies seeking big franchise brands like Ikea which want to penetrate the Romanian market, stated Razvan Blid from the company CHR Consulting on Friday, May 20 2005.
According to the CHR Consulting, the Romanian franchise market grew to €900 million in 2004, the best year so far for franchised brands.
"Statistics show that in 2004 there were 110 franchised brands, and this has now risen to 170".
The most profitable franchises on the Romanian market are in the retail and services sector, profitability being direct proportional to the investment made.
(Source: Mediafax, Bucharest Daily News)
Why to choose a franchise?
The greatest strength of franchising is its ability to bring independent retailers together using a single trademark and business concept. The benefits of this affiliation are many: brand awareness, uniformity in meeting customer expectations, the power of pooled advertising and the efficiencies of group purchasing.
For the individual owner, there are several advantages to franchising. The ever-present risk of business failure is reduced when the business program has already proved to be successful in the marketplace; the use of an established trademark saves the business owner the cost of creating and advertising a name that customers will recognize; and the advantages of group advertising and purchasing make operations more profitable. In addition, ongoing training creates an instant operational expertise that would otherwise need to be acquired through trial and error. Also, with franchising, expansion seems to come more naturally. Operating a successful franchise may quickly lead to building a second and then a third business, and so on. Fortunes have been built this way.
With a franchise business you are working for yourself - you are your own boss with the freedom and flexibility to make your own decisions, use your own skills and ideas - yet you are not by yourself - you have the collective resources of the franchise network.
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