Franchise FAQs

International Franchising

• Franchised businesses continue to grow in all corners of the world. Domestic franchisorsin many countries are increasingly establishing franchises across borders.More than 400 U.S.franchise systems operate internationally. International franchising has been successfulbecause consumers around the world recognize famous brands as symbols of quality, consistency,service, and value.
• If you are considering the purchase of a franchise, you may want to not limit the scope ofyour search to franchisors in your home country.  Increasingly, franchisors are seekingfranchisees internationally, and a foreign-based franchisor may provide you with the franchisedopportunity you are seeking.
• In many cases, foreign-based franchisors offer individual franchises to operate a single unit.They also often offer development rights to operate multiple units and "master franchise" rights. The latter is, essentially, an opportunity to be the "franchisor" for the foreign-based concept in your country or a portion of your country.
• Of course, international franchising presents some different challenges than domestic franchising.For example, if goods will come from overseas, you may need to be aware of various duties,tariffs, and transportation requirements.  You also need to consider language andcultural differences.  For instance, if you are a franchisee in a different country from the franchisor's home office, the franchisor's system may need to be modified for use in your country.

• Increasing numbers of minorities and women are discovering that franchising can be a good opportunity for everybody.  While franchising is not a panacea, it provides a means for mitigating the traditional obstacles that otherwise competent and capable small investors, particularly women and minorities, face: lack of business experience and capital.Franchisors provide managerial training and assistance on an on-going basis and, in some cases, arrange for property leases, provide equipment financing and sale-leaseback programs,and assist franchisees in obtaining financing.
• As a result of a strong economy, women are increasingly in leadership positions in franchising whether through establishing new companies, becoming single and multi-unit franchisees, or having high-level positions at corporate headquarters.
• According to the Center for Women's Business Research, as of 2004, there are an estimated 10.6 million privately-held, 50% or more women-owned firms in the U.S., accounting for nearly half (47.7%) of all privately-held firms in the country.   These firms employ 19.1 million people, and generate $2.46 trillion in sales.
• As the population of minorities in the U.S. population continues to rise, minority franchisingin cities is expected to rise.
• IFA's Minorities in Franchising Committee and the IFA Educational Foundation's Diversity Institute provides research, education, and outreach programs to expand the opportunities for minorities in franchising.
• IFA's Women's Franchise Committee (WFC) is dedicated to inspiring and encouraging women in franchising by creating a network of business professionals dedicated to strengthening the success of women in franchising.  The WFC has created a number of programs and resources in order to achieve this goal, ranging from "how to" guides and conferences to local networking chapters.

There are several trends related to the use of technology in franchising today.

1. First, many franchisors use the internet to communicate with franchise owners and suppliers through secure extranets in order to share critical information, facilitate discussion among the franchise network, post operations manuals and updates, disseminate news about ad campaigns, engage in supply chain management, and gather sales reports automatically and without the need for more labor-intensive data entry.
2. Second, franchisors use the internet to advertise their network to customers.
3. Third, some franchisors use the internet to engage in business-to-consumer (B2C) e-commerce, often with the involvement of franchisees.
4. Fourth, many prospective franchisees glean information and make contact with franchisorsusing the internet.  Some franchisors nowreport that they get more sales leads from the internet than from any other source.
5. Fifth, some franchisors have started providing disclosures to prospective franchisees by electronic means.
6. Sixth, and finally, franchisors make extensive use of technology in offering their services directly to consumers -- such as networks of businesses that offer website design and web hosting.  The prospects for, and reality of, involving technology in franchising make this a very exciting time to own a franchised business.

Sales by business format franchisors continued to increase steadily throughout the 1990s and into the 21st century. In 2001, comparing business format franchising to product distribution franchising, business format franchising had about 4.3 times as many establishments, employed 4 times as many workers, generated 2.5 times the payroll, and produced nearly 3 times as much output.

*Dave Thomas and Michael Seid, Franchising for Dummies 13 (IDG Books Worldwide, Inc. 2000).

• the type of experience required in the franchised business;
• a complete understanding of the business;
• the hours and personal commitment necessary to run the business;
• who the franchisor is, what its track record has been, and the business experience of its officers and directors;
• how other franchisees in the same system are doing;
• how much it's going to cost to get into the franchise;
• how much you're going to pay for the continuing right to operate the business;
• if there are any products or services you must buy from the franchisor and how and by whom they are supplied;
• the terms and conditions under which the franchise relationship can be terminated or renewed, and how many franchisees have left the system during the past few years;
• the financial condition of the franchisor and its system. Both the Federal Trade Commission (www.ftc.gov) and IFA (www.franchise.org ) have many helpful publications and resources. Equally important, IFA recommends that you engage an attorney to examine the contract. It is important to work with an attorney who understands franchising, especially the antitrust laws, the trademark laws, the Federal Trade Commission Franchise Rule, and applicable state laws. It is also recommended that you ask a competent accountant to examine your anticipated expenses, your financing needs, and your prospects for achieving your desired level of profitability before you sign any agreement.