Many entrepreneurs dream of starting, building and eventually expanding their own businesses and every year thousands of Americans consider both franchising and licensing as a way to make it happen. Whatever side of the coin you fall on, there are many entrances to becoming a business owner and nurturing the needs of the business you choose to grow.
The first step to understanding what will work best for you is determining what kind of business and growth plan fits your needs. Some people start out right away knowing they want to buy a franchise and be a part of a system and model that helps them every step of the way.
Others start out with a single location in both a home-based business or a retail location that could include a store, restaurant, food truck or pop-up model. The decision to franchise or license a business typically comes after a few store locations have opened or the customer demand becomes so great that an expansion plan is considered.
Let's explore a few different kinds of businesses below and provide an overview of specific areas of franchising.
What do Apple Computer, Hershey's, Mary Kay Cosmetics, and the Ford Motor Company have in common? These well-known corporations all started out as home-based businesses. In fact, more than half of all U.S. businesses are based out of an owner's home.
Starting a home-based business has many rewards as well as challenges. Learning as much as you can about working out of your house, starting a home-based business and managing your business within the law before you begin will help your business grow and prosper. A couple of questions to ask yourself:
Main Street has now become a generic term synonymous with U.S. small businesses in general. But for many entrepreneurs, the prospect of joining Main Street in its more literal meaning - i.e. the primary retail street of a village or town - or referred to as a "Brick and Mortar" location, still holds an enormous amount of appeal as a business venture.
Given the right amount of market research, business planning, and financial support, starting a retail business (and joining the more than 24 million people who earn a living this way) can offer many rewards to the right kind of entrepreneur. But how do you go about starting a retail business? The first step is understanding what is right for you and researching the process you will need to follow (from a business planning, structure, and legal perspective) to open and operate a successful retail operation.
Determine which type of Retail Business Model is Right You
Once you've developed a business plan and have an idea of what it is you wish to retail, you will need to decide which type of retail model is right for you. Traditional choices include store retailing, online retailing, non-store retailing (such as door-to-door sales, mail order, etc.) or a combination of any of these three.
You may also want to consider whether you want to launch your own retail location around a restaurant, coffee shoppe, hair salon, or pet grooming services. Mobile locations like food trucks, retail stands or pop-up kiosks are also popular.
Don't forget that many consumer goods and food and beverage businesses are regulated, so check the laws that apply to products and services you might be engaged in selling before you stock your shelves and open your doors.
For some entrepreneurs, buying an existing business represents less of a risk than starting a new business from scratch. While the opportunity may be less risky in some aspects, you must perform due diligence to ensure that you are fully aware of the terms of the purchase.
If you have decided to buy an existing business, you will want to be sure you are making the right choice in your new venture.
Want to be your own boss, but not willing to take on the risk of starting your own business from scratch? Franchising can be a great alternative if you want to have some guidance in the start-up phase of the business.
What is Franchising?
A franchise is a business model that involves one business owner licensing trademarks and methods to an independent entrepreneur. Sometimes, franchises are referred to as chains.
There are two primary forms of franchising:
Franchisor owns the right to the name or trademark and sells that right to a franchisee
Franchisor and franchisee have an ongoing relationship, and the franchisor often provides a full range of services, including site selection, training, product supply, marketing plans and even assistance in obtaining financing
Expanding your Business Through Franchising or Licensing
When it comes time to look at growing a business footprint there are many viable options to explore. Most small business owners have saved the funds or sought traditional funding sources and start by opening one or two company-owned locations. Again, depending on your business model and goals the next step could be to explore franchising or licensing.
Let’s start with franchising. A franchise is a business model which comprises three key elements – use of the brand, use of the business system and payment of a fee for the use of these two together. Many refer to franchising as having a three-legged stool which includes these three elements.
What is it?
Franchising is when you allow the use of your business name and business system for the payment of a fee upfront and/or ongoing.
Why use it:
On the other hand, licensing comes with much less regulation and stipulations associated with the process. It also does not afford the licensor as much control or influence on the licensee’s business.
What is it?
Licensing is when you allow the use of your business name and/or marks for a fee.
Why use it:
Chris Conner of Franchise Marketing Systems shares the difference between the two. You can read the full article at Franchising vs Licensing: The Best Business Model for Business.
FMS is a team of expert franchise consulting professionals based in Canada that provides solutions for franchise development, franchise consultation, and expansion of businesses globally.