1. What Is Franchising?

Franchising is a method of distributing goods and services by businesses that use the talents and energy of independent entrepreneurs to establish a brand and expand market share. A franchise involves the licensing of a trademark and a method of doing business under the trademark to an independently owned and operated business who pays the franchisor a fee for the right to operate under the trademark and a business method or system. According to a 2008 study conducted by PricewaterhouseCoopers, there are more than 900,000 franchised establishments in the U.S. that are responsible for creating 21 million American jobs and generating $2.3 trillion in economic output.

2. How Do I Franchise My Business Concept?

There are certain legal requirements which have to be met by franchisors in order to be involved in franchising, including delivery of information concerning the franchise before any franchise agreement can be signed or any money paid to the franchisor. These disclosure requirements are governed by a regulation issued by Federal Trade Commission. Although there is no need to register the franchise offering circular with the FTC, there are 14 states in which franchise registration is required before any offer or sale can be made and an additional 5 states that require filing to perfect an available exemption.

Internationally, pre-sale disclosure or registration is required in Australia, Belgium, Brazil, Canada, China, France, Indonesia, Italy, Japan, Kazakhstan, Korea, Lithuania, Malaysia, Mexico, Romania, Russia, Spain, Sweden, Taiwan and Vietnam. And some form of pre-sale disclosure is always recommended in foreign jurisdictions.

Although the legal and regulatory requirements may seem difficult, if you use a franchise law specialist to assist, the process can be completed relatively smoothly. Franchising is presently the most effective way of rapidly growing brand recognition and expanding the market for the products or services of a particular business.

3. What Type of Businesses Can Be Franchised?

Franchising is not just fast food restaurants. There are more than 100 different lines of business that are presently franchised in America. One out of every three dollars spent by Americans for goods and services is spent in a franchised business. You can drive into a new community in a car which you rented from a franchise, after spending the night at a hotel owned by a franchise, purchase a new home through a franchise, have virtually any aspect of the home improved or repaired through a franchise, have your car washed and tuned up by franchises, have your clothes cleaned and your hair cut by a franchise. You could even meet your future wife or husband through a franchised dating service. Virtually every type of consumer service is available through a franchised outlet.

4. Why Should I Franchise My Business Concept?

According to the International Franchise Association, the advantages of the franchising method of doing business include access to the experience of the franchisor, training in the method of doing business by the franchisor, increase in the value of advertising dollars through the use of group buying and cooperate of advertising techniques, ongoing support and advice from the franchisor, and the opportunity to exploit networking opportunities through membership in the particular franchised system. Franchisees like franchising because they can own their own businesses yet still be part of larger system. The consumers of America have embraced franchising as a preferred source of goods and services from outlets where they can rely on dependable standards of quality.

Because the franchisor uses other people's money and entrepreneurial talent, a system can be expanded relatively rapidly without a corresponding increase in overhead exposure. And returns on revenue earned by successful franchise companies can exceed 50%. If your goal is to establish your own franchise system for a product or service, with the proper assistance from franchise professionals, there is no reason why a successful business could not become a franchise and thereby take advantage of what the renowned futurist John Naisbitt (the renowned futurist and author of Megatrends) called "the single most successful marketing concept ever".

5. I Am a Prospective Franchisee. What Should I Do?

It is always important to individually investigate the franchisor and the people who run it. Assess how the product or service might do in the market you have in mind. And be wary of "Top 500" ratings of franchisors and similar surveys. Some of these companies are out of business the next year.

You have to ask yourself "What is the best franchise for me?" INFO Franchise News suggests four factors to consider in answering this question:

1. What is the kind of business you would like to be in?
2. What types of businesses are succeeding these days, with every indication that they will continue to succeed?
3. Is someone offering a franchise in your area of interest, that you believe will help you succeed, and that you can afford?
4. Can you work within the limits of a franchise system? Franchisors are not looking for real entrepreneurs, but for entrepreneurial sergeants who can fit into the system.

INFO Franchise News also suggests: the wise prospective franchisee should be looking for a franchisor who has been successfully doing business for several years and/or who can show that he will be doing a healthy business in the years to come. Franchising is ... a 'two-way street', with both parties ... knowing that each has certain obligations to the other.