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Franchising: What Corporate Layoffs Need to Know

When considering the idea of franchising, the vast number of unknowns and potential pitfalls can create a paralyzing level of uncertainty. From the initial investment to the intricacies of the franchising process, the questions and concerns can be daunting to corporate layoffs. With decades of experience, the International Franchise Professionals Group (IFPG) have provided definitive answers to the frequently asked questions of franchising that corporate layoffs will need to alter their trajectory towards financial security.

What is Franchising?

Franchising is a business model that allows entrepreneurs to capitalize on the use of an established brand and products that have an established market presence. Through franchising, entrepreneurs can gain the advantages of a larger business without many of the common risks associated with a standalone business. Franchisors have already poured resources into brand curriculum, operational processes, and marketing assets. The individual investor can benefit from these resources and tap into the established customer base to establish a profitable franchise business.

How Does Franchising Work?

The franchising structure allows a franchisor to grant a license to an individual or organization to operate a franchise. Usually, the agreement will require franchisees to maintain the established brand standards and utilize the warranty and contractual agreements with vendors and customers. However, the franchisee retains control of personnel and day-to-day operations. Depending on the agreement, the individual may also control pricing, marketing, and inventory ordering. This structure provides individual franchisees with the flexibility to combine the established advantages of a popular brand with their own regional business style and strategies.

Are There Different Forms of Franchising?

Yes, there are multiple varieties of franchising where each variation offers a benefit over the other. The two most common forms of franchising are business-format franchising and product-distribution franchising. With business-format franchising, the franchisor crafts a template that franchisees agree to follow when setting up their business. This template covers nearly every aspect of the business from operational processes to branding. Product-distribution franchising grants the franchisee a license to only sell the franchisor’s products, and the franchisee has complete control of how the offerings are sold.

Are There Typical Franchise Statistics?

While each franchise varies, there are some predictable statistics that franchisees can expect. For instance, according to the Institute of Business and Entrepreneurship, the failure rate of a franchise is only 10%, while the failure rate for a standalone business can top 70%. This statistic provides assurance that many individual entrepreneurs will experience success from the right franchising opportunity.

What Are the Fees and Investments?

The financial investment will vary based on the franchise and the specifics of the transaction. Generally, the cost of a franchise opportunity includes an upfront fee to the franchisor, any real estate necessary, and necessary to equipment for the business. Other investments may include additional legal fees and preliminary marketing costs. Most franchising deals require a minimum possible financial commitment during the negotiation process.

What Legal Obligations Are Involved in Franchising?

The regulations governing the franchising process vary from state to state. Most states will require that franchisors provide some form of disclosure document called a Uniform Franchise Offering Circular (UFOC). This document outlines essential details that are registered with the state. Additionally, an experienced legal team should be consulted before any agreements are signed.

Topics: Franchising, Corporate Layoffs, Franchise Opportunities

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