Master Franchise Facts
Franchising Facts
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According to a March 2008 study by the International Franchise Association, Franchising has a very significant effect on the U.S. economy:

Franchised businesses are responsible for adding $2.3 Trillion per year to the U.S. economy.

Franchised businesses include 909,253 establishments in the United States.

Franchised businesses provide more than 11 million jobs.

Franchised businesses supply an annual payroll of $278.6 billion.

Franchised businesses produce goods and services worth $880.9 billion per year.

Franchised businesses demand products and services from other businesses and provide income to their workers and owners, who then spend their income and create still more income for other parties. As this cycle repeats, the jobs, payroll, and output that exist because of franchised businesses grow beyond the jobs, payroll and output that are in franchised businesses alone.

Franchised businesses are the cause of nearly 21 million jobs, or 15.3 percent of all U.S. private-sector jobs.

Franchised businesses are the cause of $660.9 billion of annual payrolls, or 12.5 percent of all private-sector payrolls in the United States.

Franchised businesses are the cause of $2.31 trillion of annual output, or 11.4 percent of all private-sector output in the United States.

There are basically two types of franchises:

Business Format Franchises

The business format franchisee gets to use the parent company's trade name and logo just as the product distribution franchisee does, but more importantly, it gets the complete system for delivering the product or service and for doing business. It's this system that produces consistency - and consistency is a franchise's foundation for success. Wendy's, Pump It Up, Dunkin Donuts, Wing Zone, and HouseWall are all great business format franchises. Even ExxonMobil has a business format franchise: Its franchisees have convenience stores called On the Run. The business structure offers a detailed plan that explains how to do almost everything from the ground up. A franchisee is trained to manage the construction of the building, order the right equipment, and even hang the signs.

The confidential operating and procedures manuals (the how-to guides of every great franchise) generally give such specific information as how to market and advertise; open the front door; recruit, hire, train, and dress the staff; and greet customers. To ensure quality and consistency, most franchisors provide business-specific information in the manuals on how and where to order inventory, how to prepare products, and how to present them to customers. The franchisor sometimes even includes procedures for taking out the garbage, turning out the lights, and closing up at night. All these components are part of a business format franchise's unique system. And in a good system, the franchisor prepares and then supports the franchisee to ensure that when you shop in one of their locations you get the same brand experience each and every time.

Product Distribution Franchises

In a product distribution franchise, the franchisee typically sells products that are manufactured by their franchisor. The industries where you most often find product distribution franchising are soft drinks, automobiles and trucks, mobile homes, automobile accessories, and gasoline. For example, Coca-Cola, Goodyear Tires, Ford Motor Company, and John Deere distributors are all product distribution franchises.

Product distribution franchises look a lot like what are called supplier-dealer relationships - and they are. The difference between a product distribution franchise and a supplier-dealer is in the degree of the relationship. In a product distribution franchise, the franchisee may handle the franchisor's products on an exclusive or semi-exclusive basis, as opposed to a supplier-dealer who may handle several products - even competing ones. With the growth in auto dealerships that sell multiple brands, this distinction is getting just a bit clouded. The franchisee in a product distribution franchise, though, is closely associated with the company's brand name and receives more services from its franchisor than a dealer would from its supplier.