When creating a new business, some budding entrepreneurs look to established franchises as a way to get started.
Consider McDonald's, Jenny Craig, Blockbuster. These are just a few of the well-known franchise brands. But gaining access to sell for such big names will cost you: Initial franchise fees in the tens of thousands and annual royalties are just a few of the things you'll pay in exchange for tested business plans, marketing muscle and the right to sell already recognized products.
So how do you know if franchising is right for you and if it will appeal to your entrepreneurial creativity?
For some, franchising represents an opportunity to own a business with a proven track record, brand recognition and training, and sales support.
But it's not for everyone. A franchise owner loses some independence and creativity in running a business that has a set way of operating. Besides the upfront investment, franchisees pay the parent company for national advertising campaigns and annual royalty fees, on average 6.7 percent of gross sales but varying by industry.
"If you're someone who's strongly entrepreneurial and want to start your own business, that's fine," said Terry Hill, a spokesman for the International Franchise Association.
"Franchise is a system and removes a lot of that for you. Some people aren't interested in working for others who already have a system and taking directions from a parent company. They want to do their own thing."
Operating a franchise also requires the same amount of commitment and hard work as any independent business. Franchise companies want potential owners who are management-savvy.
And profit is not guaranteed, though plenty of franchise owners have found success following an established business model.
Another downside: The symbiotic relationship between a franchiser and the franchisee can sour.
For instance, several owner associations representing Dairy Queen franchisees are suing the parent company, alleging that they are being forced to convert to new restaurant lines. Franchisee associations involved in the suit include members in Maryland.
Dairy Queen says it's not forcing franchisees to do anything new, noting that 70 percent of franchisees are required to modernize their restaurants periodically under franchise agreements.
