How do certain aspects of franchise systems compare between industries? That is the question we set out to explore by taking a sample of 10 franchises from seven major franchise industries and comparing several areas that prospective franchisees look at when researching which franchise system to invest in. The data was gathered from company Franchise Disclosure Doucments (FDDs) and company websites.
Franchise Fees for Selected Auto Franchises (Ranges Given Where Appropriate)
Franchise Fees for Selected Business Services Franchises (Ranges Given Where Appropriate)
Franchise Fees for Selected Cleaning Franchises (Ranges Given Where Appropriate)
Franchise Fees for Selected Food Franchises (Ranges Given Where Appropriate)
Franchise Fees for Selected Health, Beauty & Fitness Franchises (Ranges Given Where Appropriate)
Franchise Fees for Selected Real Estate & Related Franchises (Ranges Given Where Appropriate)
Franchise Fees for Selected Retail Franchises (Ranges Given Where Appropriate)
Estimated Investment Ranges for Selected Auto Franchises (Some Totals Do Not Include Real Estate Costs; See Company's FDD for More Detailed Info)
Estimated Investment Ranges for Selected Business Services Franchises (Some Totals Do Not Include Real Estate Costs; See Company's FDD for More Detailed Info)
Estimated Investment Ranges for Selected Cleaning Franchises (Some Totals Do Not Include Real Estate Costs; See Company's FDD for More Detailed Info)
Estimated Investment Ranges for Selected Food Franchises (Some Totals Do Not Include Real Estate Costs; See Company's FDD for More Detailed Info)
Estimated Investment Ranges for Selected Health, Beauty & Fitness Franchises (Some Totals Do Not Include Real Estate Costs; See Company's FDD for More Detailed Info)
Estimated Investment Ranges for Selected Real Estate & Related Franchises (Some Totals Do Not Include Real Estate Costs; See Company's FDD for More Detailed Info)
Estimated Investment Ranges for Selected Retail Franchises (Some Totals Do Not Include Real Estate Costs; See Company's FDD for More Detailed Info)
Range of Royalty Percentage by Industry for Selected Franchises
Length of Initial Franchise Term by Industry for Selected Franchises
The graph below takes a look at how large the selected franchise systems have grown since they began franchising along with how many countries they have expanded into. Mouse over a company to learn more about each. Keep in mind, many franchises operate in more than one industry. The main industry for each franchise is listed.
Now that you’ve gotten a look at how franchise systems compare to each other in key areas, here’s some background on a few items that can’t be quantified, but need to be considered when researching franchises.
Laws and Regulations Governing Franchises
While the franchisor can be aware of the laws and regulations that generally govern their respective system, it is ultimately the responsibility of the franchisee to make sure their franchised business is in compliance.
Even for industries where there aren’t industry specific laws or regulations related to owning and operating a franchise, there are general laws such as the Occupational Safety and Health Act (OSHA), the Americans with Disabilities Act, and various environmental protection and zoning laws that will have an impact on business operations.
The following is a brief look at a number of industries for which there are specific ordinances that must be followed.
Generally, auto franchisees must comply with several laws including: the Resource Conservation and Recovery Act of 1976, the Clean Water Act of 1977, the Clean Air Act, the Comprehensive Environmental Response Compensation and Liability Act, the Oil Pollution Act, the Toxic Substance Control Act and similar federal, state and local laws and regulations.
When it comes to food franchises, regulations include health, sanitation, food and beverage handling, food preparation, waste disposal, smoking restrictions and advertising and point-of-sale disclosures, including statements concerning the nutritional and dietary characteristics of the food served. If the establishment you are opening offers alcoholic beverages, then you must comply with all laws relating to the sale of beer and wine, including obtaining all necessary licenses and permits as well.
For real estate franchises dealing with brokerage, each state has its own laws and regulations. An individual must be licensed by that state as a real estate broker before that person may provide services. Additionally, some states may have home protection, home warranty, residential service contract or insurance laws and regulations that must be abided by. Real estate brokerage franchisees must also comply with the National Association of REALTORS Code of Ethics as well as any separate code of ethics that may be developed by the franchisor.
Because of the access to valuable and personal property commonly associated with cleaning jobs, special attention from cleaning franchisees must be given to security concerns. Some cleaning franchise companies require background checks for verification. In addition, prospective franchisees may not be able own a cleaning franchise if they are or ever were convicted of, or plead guilty to, a felony involving dishonesty or breach of trust or any type of assault. Additionally, franchisees in this industry may not be able to employ anyone who has been so convicted.
Franchisees in the health, beauty and fitness area are subject to special government regulations as well. Personal appearance workers (also referred to as aestheticians in instances) are required to be licensed in all states (with the exception of shampooers). License qualifications for a license vary by state, and licenses are usually non-transferable between states. For fitness franchises, following guidelines for first aid equipment and making sure workers have the proper certifications are necessary. Health clubs also must have postings about steroids and other drug use, enforce limits in regards to the supplements sold, and follow rules on memberships, if applicable.
Laws and regulations for retail franchises are just as diverse as the industry itself. Provisions for retail franchises are largely dependent upon the services and products sold within the establishment.
As you can see, laws and regulations are not uniform from place to place. Before entering into a franchise agreement it is strongly urged that you seek the advice of a lawyer or consultant who is familiar with your state and local laws as well as the appropriate state licensing authorities.
Multiple Unit Types
Some franchise companies offer multiple types of units. A main reason this is done – from the franchisor perspective – is to make the service or product offered by the franchise accessible to as many customers as possible. A franchise can have stand-alone locations that offer a full line of services or products, while also having smaller locations (such as a fast food franchise located in a gas station) that may not have the full line of products or services, but fulfills a need/want in a market location.
In regards to franchisees, one reason alternative unit types have been developed is the economy. By offering multiple levels of investment, a franchisor can expand their potential pool of candidates to include those who may not have the means to purchase a full-scale model of the franchise. An example of this is a franchisor charging a lesser franchise fee for a smaller territory.
An emerging reason for franchisors to adapt their franchise systems to offer multiple unit types is to serve different demographic groups. Recently, Snap Fitness partnered with Rolling Strong, a company promoting health and wellness for drivers, to debut mobile gyms at 10 Pilot Flying J truck stops across the country. Within these mobile gyms – a 960-square-foot gym built inside a modified tractor trailer – truckers will be able to exercise while on the road.
Many times a franchise will be granted for operation at a certain location that will be agreed upon by the franchisee and the franchisor. Generally, the phrases “protected territory” or “exclusive territory” refer to whether another franchise of the same, or similar, type can be within a certain radius of the franchisee’s business. Often, this territory radius is established by the franchisor after a consideration of geographic, market, population, and other relevant factors, as well as the franchisor’s overall development strategy.