Franchising is the practice of using another firm's successful business model. The word 'franchise' is of anglo-French derivation - from franc - meaning free, and is used both as a noun and as a (transitive) verb.[1] For the franchisor, the franchise is an alternative to building 'chain stores' to distribute goods and avoid the need for investments and liability for a chain. The franchisor's success depends on the success of the franchisees. The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business.
Businesses for which franchising work best have one or several of the following characteristics[citation needed]:
- A good track record of profitability
- Ease of duplication
- Detailed systems, processes and procedures
- A unique or unusual concept
- Broad geographic appeal
- Relative ease of operation
- Relatively inexpensive operation.
As practiced in retailing, franchising offers franchisees the advantage of starting up business quickly based on a proven trademark, and immediate access to the tooling and infrastructure, as opposed to having to develop them.
The following U.S. listing tabulates[3] the early 2010 ranking of major franchises along with the number of sub-franchisees (or partners) from data available for 2004.[4] As can be seen from the names of the franchises, the USA is a leader in franchising, a position it has held since the 1930s when it used the approach for fast-food restaurants, food inns and, slightly later, motels at the time of the Great Depression. As of 2005, there were 909,253 established franchised businesses, generating $880.9 billion of output and accounting for 8.1 percent of all private, non-farm jobs.
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