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How Franchising Works: An illustrated guide



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the next time you pull up to the

drive-through you may not know it but

you're part of a business model that's

fraught with turmoil the model is called

franchising and it's spreading maybe

you've heard the phrase fast-food

franchise but do you really know what it

means or how it works you might be

surprised by how franchising is

affecting your community and the whole

economy we're talking way more than

burgers and fries on one side the

company decides it has a good thing

going it wants to expand but it doesn't

want to run all the new locations it's

just not familiar enough of those places

it might be short on money for the

expansion and it doesn't want to employ

a bunch of local workers and the company

wants the person in charge of each

location to be someone special someone

with skin in the game

on the other side is that special person

she wants to start a business

she knows the local market she has some

money to invest or can qualify for a

loan but not enough to buy property fix

it up by allure equipment and maybe not

enough for much marketing she might not

know the industry very well and would

rather not go it alone so besides make a

deal the company gives its new

franchisee what she needs to hit the

ground running

she takes the company's training course

and pays an initial fee for the

franchise the franchise model depends on

a good brand that means more than

anything consistency

if it's fast-food you'll see the same

thing at every drive-through window

cashiers wearing the same logo menus

offering the same food all prepared in

the same way the customers remain loyal

to the brand no matter where they go

what protects the brand is the franchise

agreement the rules for a franchisee

might cover everything from operating

hours to where she buy supplies the

agreement also acquires the franchisees

to pay royalties typically five to ten

percent of the location sales but

there's no guarantee the franchisee will

flourish franchisees go belly-up the

bout as often is on franchised owners

still many franchisees manage to hang on

some do well even open other locations

the company and its franchisees don't

always see eye to eye the company might

impose a higher royalty it might limit

any flexibility in finding supplies and

setting prices the franchisee can start

to feel overburdened but if she doesn't

sign on and follow the rules the company

might take over the franchise she might

lose her business for the company's part

it has reasons to write rules and

enforce them making all franchisees buy

from the same supplier can help bring

down cost and higher fees can fund more

advertising the company also wants its

franchisees to follow standard rules

freeloading on the brand is not allowed

franchise employees the folks who work

behind the cash register like saying

they're not known for earning big bucks

but economists disagree about why some

blame the wages and work conditions on

the industries where franchising has

taken off where competition is cutthroat

and the jobs are low-skilled other

economists blame low wages on the

franchise model itself

when a company franchises they point out

its adding extra owners that means more

people taking slices of the pie so

there's more pressure to cut costs like

wages and this leaves less money for the

workers there's another debate about

franchising how it affects the economy

once I claims the model has proven

itself more efficient that can mean

lower prices for consumers and more

consumption so more production and more

jobs the other side claims that

franchising leaves the workers with less

money for buying stuff and that means

less consumption less production and

fewer jobs we'll let the experts keep

fighting about that one thing is clear

though this way of doing business the

franchise model it's spreading gas

stations car dealerships restaurants

convenience stores hotels eyewear

retailer's tax services childcare

centers legal services news media

janitorial services home health care dry

cleaners the long house community

support Carpet Cleaning pet supplies

hardware store tutoring gems real estate

printing long-hair Android or e services

play places sign stores battery stores

laundromats

coffee shops garage door repair computer

repair cell phone repair ice cream shop

services car rental leak detection

window cleaning plumbers home inspection

HVAC repair travel agency