Franchising is a unique form of the use of the successful business model of another company. It allows anyone to immediately start their own business by joining a franchise chain and using its brand and developed know-how of its tested business model. In the U.S., the franchising sector generates annual sales of over $ 1.5 trillion.
Different franchises work by different mechanisms, but the essence of it is that the franchisor gives the franchisee the right to use its trademark and successful business model for the distribution of goods and services. In return, the franchisee pays a fee.
Starting your own business, with your own firm and investment at your own risk, but under the brand of an already established business, the franchisee has a greater incentive to work for the success of the company rather than a hired employee because he or she has a direct participation in the business.
For example, if you want to open an Italian restaurant, you will need to hire and train employees, find the right place for the restaurant, order design, compose a menu, invent a name, create uniforms, website, buy furniture and… as well as a bunch of other things in order to create your new business from scratch. If you do not have previous experience in this area you will go through a series of mistakes before you get to any true solution. The designer will slow you down and you will have to search for a new one, the pasta will prove bad for consumption and you will need to change the recipe, the waiters will be unable, uniforms color will fade after the first washing, the software program will collapse and will erase all data on turnover… And during all this time you will lose money, customers and nerves. So only the best on the market survive and manage to open the second, third and fourth unit. To get there, however, takes years of experience.
Now imagine that within just two months you can open the restaurant, using the experience and knowledge of an already successful business model. This way you will avoid repeating others’ mistakes, because you will have ready-made solutions to the problems you will face.
According to a research conducted by the International Franchise Association (IFA), 82% of the start-up businesses with franchise continue to be on the market after the fifth year, while statistics for the independent new companies shows only 20%. Expectations are that in 2035 over 50% of all retail sales in the world will be realized by franchises.
The rapid development of the franchising market which is observed in recent years continued in 2013. Possibilities for the development of the franchise business in Bulgaria are large. Whole sectors offering goods or services have not been developed yet and have the potential to build a national chain – optics, dry cleaning, kindergartens, transport and moving services, and others.