SNAPSHOT OF THE FRANCHISE INDUSTRY

A recent study showed that there are over 2,500 franchisors doing business in North America in over 470,000 franchised locations. In a White House Conference Research Study, Francine LaFontaine of the University of Michigan School of Business has written that franchise businesses accounted for "about one third of all retail sales in the U.S., 10% of all full-time businesses with employees, and provided employment to more than 7 million Americans." The International Franchise Association lists seventy-five different industries that use franchising to get their goods and services to market. Nonetheless, this huge force in the economy is small business through and through. Most of the franchisors doing business today have less than 150 franchised units, and the average investment before real estate expense in over seventy-five percent of franchises is less than $250,000.

Franchise businesses are everywhere in your community, and they go far beyond the big fast food chains. The top industries employing franchise distribution include fast food, retail sales, automotive sales and service, full service restaurants, lodging and business services. Franchises include businesses from very large regional bottlers of major soft drink labels down to single person home-based business and marketing consultants.

Business format franchising has won a major place in the economy because of the way it deploys capital. Franchising allows a brand owner to expand without the crippling capital requirements and owner's management difficulties of developing and running a purely company-owned chain. The brand owner's need to tap someone else's capital provides an attractive opportunity to the entrepreneur. The modest investment made by each franchisee provides enormous capital (because of their large number) to quickly expand distribution while allowing the small investors to participate in a business with more brand equity and better systems than they could hope to develop alone.

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