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owners set up a competing business that draws away their former—and yourcurrent—customers?Getting a FranchiseLastly, you can buy afranchise7. Under this setup, afranchiser(the company thatsells the franchise) grants thefranchisee(the buyer—you) the right to use a brandname and to sell its goods or services. Franchises market products in a variety ofindustries, including food, retail, hotels, travel, real estate, business services,cleaning services, and even weight-loss centers and wedding services. There arethousands of franchises, many of which are quite familiar—SUBWAY, McDonald’s,7-Eleven, Holiday Inn, Budget Car Rental, RadioShack, and Jiffy Lube.As you can see fromFigure 5.8 "The Growth of Franchising, 1980–2007", franchisinghas become an extremely popular way to do business. A new franchise outlet opensonce every eight minutes in the United States, where one in ten businesses is now afranchise. Franchises employ eight million people (13 percent of the workforce) andaccount for 17 percent of all sales in this country ($1.3 trillion).“Census Bureau'sFirst Release of Comprehensive Franchise Data Shows Franchises Make Up MoreThan 10 Percent of Employer Businesses,” U.S. Census Bureau, September 14, 2010,”U.S. Census Bureau.economic_census/cb10-141.html(accessed August 31, 2011).7. Form of business ownership inwhich afranchiser(a seller)grants afranchisee(a buyer) theright to use a brand name andto sell its products or services.Chapter 5 The Challenges of Starting a Business5.5 Starting a Business242
Figure 5.8The Growth of Franchising, 1980–2007In addition to the right to use a company’s brand name and sell its products, thefranchisee gets help in picking a location, starting and operating the business, andadvertising. In effect, you’ve bought a prepackaged, ready-to-go business that’sproven successful elsewhere. You also get ongoing support from the franchiser,which has a vested interest in your success.Not surprisingly, these advantages don’t come cheaply. Franchises can be veryexpensive, usually depending on the amount of business that a franchisee isexpected to do. KFC franchises, for example, require a total investment of $1.3million to $2.5 million each. This fee includes the cost of the property, equipment,training, start-up costs, and thefranchise fee—a one-time charge for the right tooperate as a KFC outlet. McDonald’s is in the same price range ($1.1 million to $1.9million). SUBWAY sandwich shops are more affordable, with expected totalinvestment ranging from $84,000 to $258,000. If you’d prefer teaching dance andexercise classes, you could get a Jazzercise franchise for anywhere from $3,000 to$76,000. If you don’t want to deal in food or dance, you might want to buy a datingservice. The Right One® franchises go for an initial investment of $98,000 to$254,000, depending on location.“Entrepreneur 2011 Franchise 500,”Entrepreneur,(accessedAugust 31, 2011).