What is a franchise?

Franchising is a business strategy for getting and keeping customers. It is a marketing system for creating an image in the minds of current and future customers about how the company’s products and services can help them. It is a method for distributing products and services that satisfy customer needs.

Franchising is a network of interdependent business relationships that allows a number of people to share:

  • A brand identification
  • A successful method of doing business
  • A proven marketing and distribution system

In short, franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, i.e., to get and keep more customers than their competitors.

Franchise Industry Overview

The reason to purchase a franchise is simple. Today, most independent business people have their hands full just relating to the numerous challenges they face on a daily basis. There is little time for the entrepreneur to develop strategies and to analyze the business situations that may confront them. The demands and needs of the consumers are constant.

Therefore, they turn to franchising where there is the staff and support of a multifaceted organization behind them. They have the ability to draw on the training and systems provided by the franchisor, as well as, they can call upon and collaborate with the other franchisees in the system. Most franchisors have dedicated personnel focused specifically on addressing not only the future trends of their business, but also research and development relating to equipment, products, services, training and marketing strategies.

Franchise businesses make up more than 10 percent of all U.S. businesses that have employees, according to the 2007 Economic Census Franchise Report, which is the result of cooperation between the U.S. Census Bureau and the International Franchise Association (IFA) and is the first detailed and comprehensive report on this segment of the U.S. economy. The Census Bureau report was based on data collected from 4.3 million total businesses with paid employees.

  • There were 828,138 franchised business establishments in the United States in 2007.
  • Franchised businesses provided 9,125,700 jobs, or 6.2 percent of the U.S.private non-farm workforce in 2007.
  • Franchised businesses supplied an annual payroll of $304.4 billion, or 4.2 percent of all private non-farm payrolls in the United States in 2007.
  • Franchised businesses produced goods and services worth $802.2 billion, or 3.4 percent of private non-farm output in the United States in 2007.
  • Franchised businesses contributed $468.5 billion to GDP, or 3.9 percent of all private non-farm GDP in the United States in 2007.
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