Why Food Cart Franchising?

According to the GMA Documentary-Show: Jessica Soho, Food Cart Franchising in the Philippines is the perfect business for the year 2013. In the 1950's many people said that franchising was a scam or scheme. Today, people pay as much as $1 million upfront fees just for the rights to a premier franchise. We can see it everywhere, from the sites of McDonald's every 15 minutes, to the unlimited rice of Mang Inasal upto the 7 Eleven Stores in highways and villages.

But let's investigate, What is franchising? Why is it the mot popular business in the present?

Franchising

Franchising is a way to grow your business that lets you sell your knowledge, experience, and concept to dedicated individuals who put up the money to open and operate new franchise locations.Franchising will let you expand with less overhead and fewer day-to-day operating headaches, while the franchise buyers pay you upfront franchise fees and ongoing royalties forever.

Franchising has expanded to include an ever-widening variety of businesses, products, and industries. Its application to new concepts and emerging industries will only increase in the future.

Franchises are generally known to the public under a well-promoted name like McDonald's® not the names of the individual franchise owners. As a result, the general public may not realize that many businesses are in fact franchises. The first box below depicts 100 well-known franchises; the second box lists 100 relatively unknown franchise companies that have more than 200 franchises each.



Historical Definition 
Historically, the word "franchising" meant the granting of a right or privilege to an individual or group. In more recent times it includes business arrangements known as franchises, licenses, dealerships and distributorships, to name a few.

Regulatory Definition
The Federal Trade Commission defines "franchising" as a business relationship in which an individual owner: 

1. Uses a Common Name (such as Burger King® or Dunkin' Donuts®);

2. Receives Training/Assistance/Guidance (from the Parent Company);

3. Pays a Fee To the Parent Company ($500 or more within the first six months of operation).

If a business arrangement includes these 3 elements, it's a franchise. It could be called a license, dealership, distributorship, or association but it's still a franchise and must comply with the rules of the Federal Trade Commission and certain state regulatory authorities.

Business Definition
Franchising has been described as:

A method of DISTRIBUTION of goods and services;

A method of MARKETING;

A method of GROWTH;

A method of CAPITAL ACQUISITION;

And increasingly, franchising has become:

A method of EMPLOYMENT.

For a company wishing to expand to other locations, franchising offers the opportunity to have branch locations operated by "dedicated" managers rather than company employees. A franchisee is dedicated because it's their business (operating under the franchisor's name and rules) and they've made an investment. A franchisee will sell more, service customers better, and control costs more tightly than a company employee.

What Franchising is NOT 

1. Franchising is not an industry. There is no such thing; over 300 different industries and types of business utilize franchising.

2. Franchising is not a magic show. Franchising is not about selling some franchises. It's about building a company - a serious business venture. A person who franchises their restaurant to others will still be in the restaurant business. They will have to develop new menu items, new promotional programs, new décor concepts, and so forth.

Types of Franchises
Historically, franchises have been generally categorized as "product and trade name" franchises or "business format" franchises. Today, the real difference is that under the "product and trade name" franchise, the franchisor is usually the manufacturer of a product, which it wholesales to the franchisee for resale. Under the "business format" approach, the franchisee is usually not reselling a product manufactured by the franchisor. Under both formats, the franchisee is operating the business according to the franchisor's rules, methods, and systems.

You've probably heard of these franchises:
Allstate	Days Inns	Jeep	Popeyes
Applebee's	Denny's	Jenny Craig	Porsche
Arby's	Domino's Pizza	Jiffy Lube	Prudential
Arthur Murray	Dunkin' Donuts	John Hancock	Quality Inns
Athlete's Foot	Exxon/Mobil	Kentucky Fried Chicken	Radio Shack
A&W Rootbeer	Firestone	Liberty Mutual	Radisson
Bacardi	Ford	Lincoln	Ramada
Baskin-Robbins	General Motors	Major League Baseball	Re-Max
Best Western Hotels	GNC	Manpower	Rolls-Royce
Better Homes & Gardens	Goodyear	Marriott	Roto-Rooter
BF Goodrich	Guinness	Maytag	Sears Roebuck
Blockbuster Video	Haagen-Daaz	McDonald's	7-Eleven
BMW	Hallmark	Mercedes-Benz	7-Up
Budweiser	H&R Block	Metlife	Shell
Buick	Hardee's	Midas	Sheraton
Burger King	Harley-Davidson	Miller Brewing	Stride Rite
Cadillac	Heineken	Mitsubishi	Sunoco
Century 21	Hertz	National Basketball Assn.	Taco Bell
Chevrolet	Hilton	National Car Rental	Texaco
Chrysler	Holiday Inn	National Football League	Toyota
Coca-Cola	Honda	National Hockey League	U-Haul
Coldwell Banker	Howard Johnson's	Pearle Vision	Volkswagen
Comfort Inn	IHOP	Pepperidge Farm	Volvo
Coor's	Jack In The Box	Pepsi-Cola	Wendy's
Dairy Queen	Jaguar	Pizza Hut	Westin

...but you may not have heard of these - each of which has more than 200franchises
Aaron's Rents	Cruise Planners	Maid To Perfection	Qdoba Grill
AlphaGraphics	Culver's Frozen Custard	Marble Slab Creamery	Red Robin
Americ Inn	Del Taco	Matco Tools	Results Travel
Baja Fresh	El Pollo Loco	Microtel	Rita's Water Ice
Batteries Plus	Embroid Me	Minuteman Press	Round Table Pizza
Beef O'Brady's	Express Personnel	Moe's Southwest Grill	Signs Now
Big O Tires	Fast Frame	Money Mailer	Sign-A-Rama
Boston Pizza	Fastsigns	Mr. Electric	Sir Speedy
Breugger's Bagels	Firehouse Subs	Mr. Rooter	Spherion Staffing
Budget Blinds	First Choice Haircuts	Mr. Transmission	Stanley Steamer
Buffalo Wild Wings	Fox's Pizza Den	Once Upon A Child	Steamatic
Candy Bouquet	Golden Corral	One Hour Heating	Sylvan Learning
Carstar	Great Steak & Potatoe	Pak Mail	Taco John's
Cartridge World	Hollywood Tans	Papa Murphy's	Taco Time
Certa Pro Painters	Home Instead Senior Care	Paul Davis Systems	The Goddard School
Chester's	Huddle House	Perkins Restaurants	The Little Gym
CiCi's Pizza	Hungry Howie's	Pet Supplies Plus	Tropical Smoothie Cafe
Cinnabon	Interim Health Care	PIP	Tuffy Auto Service
Clean Net	Jamba Juice	Pizza Inn	Two Men And A Truck
Comet Cleaners	Jani-King	Planet Beach	Unishippers
Comfort Keepers	Kiwk Kopy	Plato's Closet	Valpak
Cost Cutters	Labor Finders	Play It Again Sports	Village Inn Restaurants
Country Inn	Lady Of America	Post Net	Wild Birds Unlimited
Coverall	Lawn Doctor	Precision Tune	Wing Stop
Cruise One	Maid Bridgade	Proforma	Zaxby's

The History of Franchising

The roots of franchising can be traced to the end of the American Civil War and the Singer Sewing Machine Company.

To view a history of franchising from the turn of the century through today, click here.

But, franchising really started growing at the beginning of the 1900's, when General Motors franchised dealerships. It spread through the automobile, soft drink bottling, and gasoline industries by the 1930's. By 1950, 100 companies were franchising.

Modern franchising evolved during the 1950's with the expanding post-World War II economy, growing interstate highway system, developing suburbs, and increasing automobile ownership. A mobile American public traveled farther from home and sought familiar names with standardized service.

The high growth and emerging popularity of franchising in the 1950's, 1960's and 1970's encouraged the start up of a number of ill-conceived, get-rich-quick schemes, ultimately leading to several states regulating franchising in the early 1970's. Regulation by the Federal Trade Commission followed in 1979. This regulatory activity helped legitimize franchising to the point that it is now a widely accepted method for business expansion.

During the 1980's, franchising began a period of exponential growth. In 1980, approximately 1600 businesses franchised; by 2000, the number had more than tripled!

Franchising Today

Each year more than $1 trillion in goods and services are sold through franchises in the United States.

35% of all retail goods and services are sold through franchises.

There are over 900,000 individual franchise outlets in this country.

Each working day a new franchise opens every 5 minutes.

Over 300 different types of industries and businesses are franchising.

Such factors as, the movement from a manufacturing to a service economy, technological advances, and women entering the work force, have provided expanding opportunities for people to own their own businesses. Franchising's impact has been to accelerate this private business ownership.

The Advantages of Franchising

To Consumers
Franchising is booming because consumers like to purchase goods and services from familiar names with reliable standards of service and quality. They like to deal with businesses where the owner is on-premise.



To Franchise Buyers
These are some of the advantages of buying a franchise.

Lower Risk - Since a franchise is usually a duplicate of an already successful business, it should have a good chance of success.

Quicker Startup/Higher Sales/Higher Profit/Increased Equity - When a person buys a franchise their getting start-up support and their buying the "learning curve." As an alternative, if they were to start a similar independent business it would take longer to achieve the sales volume associated with buying a franchise. The trial and error stages have already been done by the franchisor and as a result, profits and business equity are built faster.

Be One's Own Boss - Franchising allows an individual to feel the pride and independence of owning their own business.

Training - The training an individual receives in a franchise should help them avoid mistakes and generate more volume and profits.

Support/Ongoing Assistance - Ongoing support gives a franchise owner quick access to help solve problems and a feeling of not being alone.

Collective Buying Power - Collective buying power should help reduce costs of doing business.

Regional/National Marketing - A chain of operating units can afford to generate far more exposure and advertising than can an independent, resulting in higher sales volume.

Systems/Policies/Procedures Already Tested and Established - Tested and proven systems save development time and help prevent mistakes.

Trademarks - Customer awareness of the franchise name is a tremendous benefit.

Mutual Destiny - The success of the franchise owner is in the best interest of the franchisor.

Research and Development - The franchise owner can utilize the research and development performed by the franchisor. This saves valuable time and capital.

To The Franchise Company
These are some of the advantages of franchising your business.

Provides Expansion Capitol - The franchisee makes the investment to open the branch unit.

Fast Growth - Franchising allows companies to grow quickly because the franchise buyer puts up the investment capital and provides "dedicated" management - thus freeing up the franchisor's time to open more units.

Quality On-Site Management - Since the franchisee is more dedicated than a company employee, sales and profits will be higher, expenses will be lower, customer satisfaction will be greater, and quality standards will be maintained. Today, most franchisees are well-educated, experienced, former middle managers.

Fewer Day-to-Day Operating Headaches - The franchisee makes the day-to-day operating decisions. They take care of employee problems, hiring, firing, etc.

Less Corporate Overhead - Since the franchise owner takes care of the day-to-day operating responsibility, the parent company support structure for franchise units is smaller compared to company-owned units.

Faster Market Penetration - Franchising can allow a company to penetrate the market quickly.

Higher System-Wide Sales - Research has shown that individual unit sales increase when converted to a franchise system. Because the owner is on site, a typical franchise unit will have higher sales than a company-owned unit. McDonald's® says that "We've discovered that the franchised restaurants do better than the company owned."

Captive Market For Your Products - Franchising can provide a dedicated captive market to manufacturers.

Financial Leverage - Franchising provides a way to cash in on your experience and knowledge by selling it to others.

Opens Up Regional/National Account Opportunities - Some businesses lend themselves to serving regional or national accounts, whereas a local independent couldn't service a national account.

What's Driving Franchising's Growth?

1. Consumers
Franchising provides consumers with well-known, reliable, convenient name-brand products and services.


 

2. Companies Wanting to Grow
Companies need to grow to maximize sales and profits and to realize economies of scale and marketing efficiencies. Franchising provides companies with expansion capital, potential for high growth, dedicated local operators sharing the risks and costs, and better service to the customer.

3. Individuals Desiring to Own Their Own Businesses
Changing economic, demographic, and social factors are encouraging people to own their own businesses. They seek to be free from the pressures of the corporate world, and control their own destinies.

Here are some of the forces driving this desire to own a small business:

The Corporate Job Squeeze
Large companies aren't loyal anymore. Faced with competitive pressures, even the best of large companies that in the past never laid off workers, now are forced to do so as a result of corporate takeovers, leveraged buyouts, and increasing global competition. Employees increasingly feel "it's every man for himself!"

Transition from a Manufacturing to a Service Based Economy
The developed countries of the world are being transformed from manufacturing to service based economies.

In the U.S. in 1900, 70% of the work force was employed in the production sector; 30% in the service sector. By 1950, the ratio was 50%/50%, and now, 70% of workers are in the service sector.

Manufacturing derives its efficiency from big mass production factories requiring a large investment to set up, thus limiting the total number of factories and eliminating the opportunity for a middle income individual to own a factory.

Service businesses realize efficiencies on a much smaller scale and therefore there can be many of them. Since a smaller investment is required to open a service business many more people can own one.

Additionally, the huge, aging baby boom generation, large numbers of women entering the workforce, the growing elderly population, changing attitudes regarding convenience and quality, emerging technologies, and mass advertising have created a tremendous demand for services and have encouraged development of a wide variety of service businesses.



The Risk Takers
Members of the current generation are more likely to take the risk to start their own businesses.

Per capita income in real terms has increased dramatically, especially since 1950.

Women now comprise 50% of the work force. While this helps drive the demand for service businesses, it also provides families with two incomes and thus the financial ability to start a new business venture.

The current generation is used to living on credit, doesn't know about "The Great Depression," and will take risks more readily than its parents.

The civil rights movement, women's movement, high pay for athletes, entertainers, and corporate executives, combined with increased education and more individual freedoms have resulted in worldwide democracy movements and individuals seeking their "fair share." Individuals want to grab at the brass ring and fulfill their dreams.

All of the factors driving people to own their own businesses are also driving them to owning a franchise. Franchising offers these people opportunity with reduced risk. The high success rate of franchises, combined with the benefits of belonging to a network or chain, make franchising a very logical, attractive method of owning a business.

The Future of Franchising

These are the major trends that we see in franchising in the near future.

 Conversion of Company-Owned Stores/Restaurants/Offices/Sales Reps to Franchising

As companies become increasingly aware of the benefits of franchising, we predict many will turn to it.

The Entrance of Fortune 1000 Corporations into Franchising

Faced with a massive drain of the best talent and brains, large corporations will turn to franchising not only for its benefits but also to "keep" their best employees.

International Franchising Will Boom

With the world getting smaller, many U.S. companies will embrace franchising to expand overseas. More foreign companies, with their desire to tap the huge American market, will start franchising in this country.

Franchising Predictions

We predict that franchising will not only continue its dramatic growth but it will actually accelerate exponentially worldwide.

Dollar Sales Through Franchise Outlets
Currently over $1 trillion in the U.S., we expect it to reach $2 trillion by the year 2015.

Percentage of All Retail and Service Sales Through Franchise Outlets
Currently at 35%; we estimate that 40%-45% of all retail and service sales will be through franchise outlets by the year 2015.

Number of Franchise Outlets
Currently over 900,000; we estimate this number will rise to over 1,300,000 by the year 2015.

Number of Companies that Franchise
Currently there are approximately 6,000 companies that franchise; due to the increasing awareness and popularity of the franchise concept, we expect this number to grow to 10,000 by the year 2015.