STARTING A BUSINESS IN THE USA

 STARTING A BUSINESS IN THE USA (PART 3): BECOMING A FRANCHISEE IN THE USA, CREATING OR TAKING OVER A FRANCHISE

As a foreigner, that is, a non-US citizen, why is it worthwhile to become a franchisee in the USA? What are the benefits of franchising when starting a business across the Atlantic? Investir.US takes a look.

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Essential notions about franchising in the USA

A franchise is a method of distributing products or services involving a franchisor and a franchisee. The franchisor establishes the brand or sign and a business system. The franchisee, in turn, pays a royalty and, often, an entry fee, which grants them the ability to do business under the franchisor's name and system.

A franchise is a contract that binds both parties. Generally speaking, this term is used more often to refer to the business that the franchisee operates.

The commercial franchise is the most common type in the United States. In this type of franchise, the franchisor provides the franchisee with their business name, products, and services, as well as a complete operating system. The franchisee receives assistance with site selection and development, operations manuals, training, brand standards, quality control, a marketing strategy, and business advice.

First and foremost, franchising in the USA means:

A matter of relationships

When thinking about becoming a franchisee in the U.S., people tend to focus primarily on laws and regulations. While the law is important in business relationships, it isn't the central element in the franchise system. Franchising is about the value of the franchisor's brand, how the franchisor supports its franchisees, how the franchisee fulfills its obligations to provide products and services that meet the system's brand standards, and, most importantly, the relationship between the franchisor and its franchisees.

A brand affair

A franchisor's brand is a valuable asset. It's what will attract buyers and determine how often they visit the store. It's true that customers don't care who owns the business, as long as their needs and expectations are met. Becoming a franchisee in the USA means developing a relationship with customers to build loyalty, knowing that many of them will choose to buy from you because of the quality of your services and the personal relationship you maintain with them. But above all, they trust the brand, which must absolutely meet their expectations.

A question of process and support

Large franchisors provide systems, tools, and support that enable their franchisees to meet the system's brand standards and ensure customer satisfaction. Furthermore, franchisors and all franchisees expect any newcomers to independently manage the day-to-day operations of their business(es) to enhance the company's reputation in the marketplace.

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A contractual relationship

From the outside, franchises tend to look similar. But upon closer inspection, they are very different. In a franchise system, the brand owner does not manage or operate the locations. As such, customer service is the responsibility of the franchisee.

It's important to know that in the United States, a franchise is a specific form of licensing agreement defined by the Federal Trade Commission and several states. Across the country, a franchise generally exists when:

The franchisor grants a franchisee the right to use its trademark or service mark;

To identify the franchisee's activity in marketing a product or service using the franchisor's operating methods;

The franchisor provides the franchisee with support and exercises certain controls;

The franchisee pays a royalty to the franchisor.

It's also worth noting that the definition of a franchise varies across all U.S. states. Some, for example, include a marketing plan or a community of interest provision in the franchise definition. Therefore, given the differences between states, it's important to look beyond the federal definition of a franchise to understand a particular state's requirements.

In summary, franchising is a network development model based on a specific contract . The contracting parties are:

A company that has developed an original, profitable and duplicable concept (the franchisor)

Legally independent individuals or legal entities wishing to exploit the concept developed by the franchisor (franchisees)

By becoming a franchisee, you increase your chances of success by at least twofold compared to starting a new business . (U.S. Department of Commerce)

Becoming a franchisee in the USA: facts and figures

Let's start with some numbers:

In the United States, the franchise sector covers more than 300 industries. It is the ultimate development model .

Nearly 9 million Americans were employed by franchised establishments in 2019;

In 2019, the economic output of franchises generated $787.5 billion;

Fast food and service franchises alone represent $350 million

Among the most important franchises:

McDonald's, with more than 38,000 locations worldwide and a workforce of some 2 million people;

Subway, which has 41,000 locations worldwide, opening nearly 2 restaurants per day since its inception in 1965 and selling 7.6 million sandwiches per day;

7-Eleven, with over 71,000 units, the last one opened in Seoul;

Hertz, which operates in more countries than any other franchise, 150 countries in total

Revenue and Profitability of a Franchise in the United States

$82,000: This is the average annual net profit of a restaurant franchise (excluding potential manager salaries)

$50,000: This is the minimum investment to consider for a franchise. The budget can climb up to $3 million.

15%: this is the profitability on net capital to consider as an objective for a franchise (source: entrepreneur.com)

80 hours: This is the average number of hours a franchisee spends per week at launch. It then increases to approximately 40 hours per week.

CREATE OR TAKE OVER A BUSINESS IN THE USA?

Why invest in a franchise and become a franchisee in the USA?

The question is legitimate! We've identified five reasons why it's both interesting and timely to become a franchisee in the USA. Here they are:

The experience

Becoming a franchisee in the USA means running your own business while being guided by the experience and success of the franchisor and other franchisees in the network. You are supported by people who have a track record of success to share;

The network

Becoming a franchisee in the USA means building a business network very quickly. It also means benefiting from the contact book that the franchisor has built up over several years;

Success

After 7 years, 91% of new franchisees are still in place, while 20% of individual businesses have survived;

Resources

Collaboration and networking constitute communication and marketing resources that would be inaccessible to any individual company;

The skills

Becoming a franchisee in the USA is the opportunity to develop your managerial skills in a new world or a foreign culture, while receiving daily support.