The answer may surprise you. In 2000, most analysts estimated that franchising companies and their franchisees accounted for $ 1 trillion in annual U.S. retail sales from 320,000 franchised small businesses in 75 industries. Moreover, franchising is said to account for more than 40 percent of all U.S. retail sales. Industry analysts estimate that franchising employs more than 8 million people, a new franchise outlet opens somewhere in the U.S. every 8 minutes, and approximately one out of every 12 retail business establishments is a franchised business.

In business format franchising, the franchisor prescribes for the franchisee a complete plan, or format, for managing and operating the establishment. The plan provides step-by-step procedures for major aspects of the business and, anticipating most management problems, provides a complete matrix for management decisions confronted by the franchisees. The major advantage of buying a business format franchise is that the system, the means for distributing goods and or services, has been developed, tested, and associated with the trademark. As a result, rapid expansion of a successful retail concept can occur more quickly than through company-owned expansion.

Sales by business format franchisors continued to increase steadily throughout the early 1990s. Some analysts indicate that sales through franchised establishments have grown faster than the gross domestic product. Retail sales from franchise businesses have been said to account for 15 percent of the U.S. gross domestic product. Although there is no really good recent data on the extent of franchising in the U.S; most analysts have stated that business format franchising accounts for approximately 27 percent of all franchising sales, 68 percent of all franchise establishments, and 74 percent of employees of franchised businesses.

As the economy becomes more service and technologically oriented, as more women enter the work force, and as a larger percentage of the population grows older, growth areas in franchising are responding to these changes. The industry categories in franchising that are expected to continue to experience rapid growth for the start of the new century are service-related fields such as home repair and remodeling, carpet cleaning, household furnishings, and various other maintenance and cleaning services; all business support services including accounting , mail processing, advertising services, package wrapping and shipping, personnel and temporary help services, and printing and copying services; automotive repairs and services such as quick-lube and tune-up; and other areas such as environmental services, hair salons, health aids and services, computers, clothing, children’s services, educational products and services, and telecommunications services.

While it is important to consider industry growth before investing in a franchise, it is more important to analyze an individual franchise company’s track record, keeping in mind that quick growth does not always spell success. A franchise organization that grows too quickly might not have a service team in place to support all of the units properly. Overall, long range trends indicate a steady, solid growth in business format franchising. Some will fall by the wayside, as is natural with any business, but others may well be the “household name” franchise success stories of tomorrow.

Virtually every business form you can image. The International Franchise Association now lists more than 75 different categories to describe its members. Typically, you would think of fast food and restaurants first when thinking of franchising, but franchising covers the spectrum from almost A to Z from advertising / direct mail to construction, to dating services, to home inspection, to security systems, to video sales and rentals. Printing and copying services, maid services, computer services, cleaners, lawn care services, real estate, hotels and motels, and travel agencies are excellent examples of successfully applying franchising to established industries.

The increasingly mobile American consumer has come to depend on and appreciate the consistent quality of franchised products and services. Today, no matter where they go, people expect and want the same quality, which is why consumers so often stop at franchised establishments. The ability to easily recognize a franchised store, restaurant or hotel from the outside guarantees there will be no surprises or disappointments on the inside. Quite simply, the public knows what to expect and likes it that way.

Among the points which IFA recommends for investigation are:

• 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; and
• The financial condition of the franchisor and its system

Egyptian Franchise Development Association - About Franchising

Investigate before Investing, published by IFA, is very useful for those considering investing in a franchise. 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.

Even though inaccuracy and misrepresentation carry civil and sometimes severe criminal penalties, there is no way to be absolutely sure. The disclosure document makes fraud and deception less likely. However, because the franchisor has – under penalty of law – answered in written (or electronic) form a variety of very important questions you can use to judge the offer, IFA recommends that you carefully consider the information provided and evaluate the materials, including the history and reputation of the company and its officers, with the assistance of your lawyer and accountant. Also, be absolutely sure you talk to a substantial number of others who have already obtained franchises from the company you're considering, and ask them to verify any information you question. Learn if they are "satisfied customers" of the franchisor.

Investment requirements differ tremendously. It all depends on the industry and the type of business. Total start-up costs can range from $ 20,000 or less, to over $ 1,000,0000, depending on the franchise fee for most franchisors selected, and whether it is necessary to own or lease real estate to operate the business. Moreover, the initial franchise fee for most franchisors is between $ 20,000 and 28,000. In an IFA survey conducted in 1998 on franchising, 88 percent of franchisors charge an initial franchise fee of $ 40,000 or less. The survey also revealed that an average investment, excluding real estate costs, was $318,975.You must discuss the initial fees and opening costs with individual companies, although IFA’s Franchise Opportunities Guide can supply initial background information.