When most of us think about franchises, we are referring to the business-based franchise like the top 500 franchises published in Entrepreneur magazine each year.

Entrepreneur's 75 different categories range from automotive to services, but they all have one thing in common–a systematic method to deliver services or products. Franchising is not for everyone, but for an individual who has limited business experience or someone who enjoys working within an established system, franchising can be the best possible path.

Franchising is simply a method of distributing products or services, with at least two levels of people involved. The first is the franchisor, who lends his trademark or trade name and a business system. The other is the franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system. The contract binding the two parties is the "franchise," but that term is often used to mean the actual business that the franchisee operates.

Do You Have What It Takes?

Before you go into any business, franchise or not, it is important to first ask yourself these important questions:

• Do you have strong motivation and drive to achieve success?
• Do you have confidence and enthusiasm for the product or service you will be representing?
• Are you able to motivate yourself and others and train employees?
• Do you have experience in the industry?
• Are you willing to promote your business and the brand?

The Franchise Lifestyle

Figure out if a franchise lifestyle fits into your own lifestyle. Do you have the necessary support system to open this franchise? Does your family support this decision? Do you have an accountant, banker and attorney who will assist you in your start up and growth phases?

The Importance of the Brand

In the franchise world, belonging to a system gives you, the franchisee, a competitive edge, which partially compensates for the cost of being in the system. The main value in franchising is the identity related to the brand. McDonald's is the largest franchisor in the world with over 31,000 units. Due to consistency of product delivery and global advertising, McDonald's has a major advantage over, say, Joe's Diner.

It is important to remember that since the brand's value is more important than anything else, including the service or the product, the customer's loyalty is to the brand, NOT the individual franchisee. No consumer walks into a Dunkin Donuts franchise because they know the owner. They know Dunkin Donuts. What this means is that within a franchise system, you have to play by their rules. You couldn't open a McDonald's and sell pizza, for example.

Your success as a franchisee is based on your willingness to work with in a pre-existing system, and help to build the value inherent in the brand. This kind of a business is not for everyone, so you have to be honest with your ego on this one.

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