A multi-billion trade jobs industry, franchising has become an important way of doing business, and it is projected to continue to be well into the future. The word, franchise literally means a privilege or right. Enfranchisement commonly means the right to vote. In the world of business, however, a franchise is the privilege of providing a parent company's goods or services in a given area. The formula is simple: a business with a product or service offers territories or product lines to individuals in exchange for an up-front fee and a percentage of their future profits. The company offering the franchise is the franchisor, the person or partnership buying the franchise is the franchisee.
To understand franchising in trade jobs, it is helpful to remember that it is simply a method of distribution, like retailing or direct mail. There are two ways for a company to increase profits: decrease expenses or expand revenues, preferably both. In order to increase revenues, a company must expand its distribution channels. Retailing and direct mail, however, are not practical ways of distributing many products. Does it make sense for a donut company to sell its products in a grocery store? Some do, and yet most people do not want to stand in line in a supermarket just to buy a donut and a cup of coffee. Besides, you rarely find grocery stores on downtown blocks, next to the office buildings where people work. Obviously, the best way to sell donuts is to sep up small shops in areas of heavy pedestrian traffic.
In trading jobs, the best way to distribute many goods and services is through specialty outlets, like fast-food restaurants, automotive centers, and travel agencies. In addition, the best way to ensure the profitability of these outlets is to increase their numbers. The common logic is that when a customer sees the same restaurant in several locations, he or she will figure that their food must be good, and it increases the chances that the customer will try that restaurant. So, not only do many companies need specialty outlets to distribute their products, it is in their best interest to have many outlets. And yet, opening up stores is expensive, and managing the personnel to run them can be beyond the capabilities of many organizations. If the parent company were going to operate their own additional outlets, it would require loans, leases, staff on their payroll, and investment in more equipment, among other things. The expenses involved with expansion are prohibitive for many. franchisers also would have to take on additional management responsibilities. The solution for many companies is to sell franchises.
Franchising offers additional benefits as well. franchisers usually are successful because their franchises are well managed, stemming from the franchise managers who have made an investment in their success. The financial investment of the franchisee gives the person an added incentive of making sure that the operation runs smoothly and economically. This financial incentive is not part of chain-store management. An added advantage to franchising is the collective buying power it generates. If 100 franchisees chip in for one television ad, all 100 and their parent company will benefit, but it will only cost them a tiny fraction of what the ad would have cost them on their won. Each year, the number and variety of franchisers grows. Franchising opportunities can be found in dozens of categories, with food franchises still in the lead. Food franchises include hamburger, chicken, pizza restaurants, waffle houses, ice cream shops, popcorn stores, and more.
One kind of franchise is trade name franchises. These franchises do not necessarily distribute particular brand name products, but they buy the right to be associated with an established company. Trade name franchises are common among hardware stores, which sell a variety of merchandise from different manufacturers, but which have the advantage of name-recognition when customers try to decide where to shop.
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