10) Beware of systems on offer, which appear to be franchises but are not

Spurious distribution systems.
They often offer exclusive territorial rights for a significant sum of money to sell their products. The product is usually not known, they may well be no developed demand or future market. You will be asked to purchase a starting and often costly opening stock. The supplier will not be interested in developing the market only to pressure the distributor to take more products. Never be that first distributor, contact all distributors in the network and be aware of their past experiences.

Pyramid selling schemes.
This method of distribution breeds on the greed instincts of humans; they think easy money can be made. Presentations at meetings where 'successful' early entrants to the pyramid tell others how much money they have 'earned', in a very short time. Early entrants may make money but at the expense of later entrants. You are expected to sign up at these meetings; nothing can be taken away for further consideration. Those who introduce further distributors are paid a proportion of the newcomer's entry fee. The objective appears to be, to create a sales force which will sell products door to door or directly to relatives, friends and workmates. Selling is difficult, prices are high and there is no established market. Compare this with a time proven franchise properly researched, selling an accepted brand.

The Fair Trading Act 1973 (amended by the Trading Schemes Act 1996), introduced legislation to control the way these pyramid selling systems can be operated. But it was decided not to ban these structures, because they were legitimate selling organisations which would have been put out of business.

Remember if you have any doubts that the organisation you are dealing with is not a bona fide franchisor contact:-

The British Franchise Association ( bfa@british-franchise.org.uk )
They maintain a list of approved franchisors and their franchises. Remember that not all franchise systems are necessarily well thought out or well tested. Membership of the British Franchise Association, requiring the signing of a charter for ethical franchising is good indicator of an opportunity worthy of consideration. But there is no substitute for checking out and researching a franchise; the first rule in investing in a franchise 'check before cheque'.

Contact Franchise Development Services Limited ( enquiries@fdsltd.com )
They maintain a list of franchises that they would be prepared to recommend. Further details of both of these organisations and the services they provide can be found in Lesson 5 in this Module.

11) Conclusion, what we have discovered in this lesson.

As long as the business is soundly designed, has a genuine market, and all parties are committed and fair to each other, franchising provides a superb format for re-training people to change their quality of life through greater income, generated through their own businesses. If you are suffering insecurity in your employment or kicking your heels in redundancy, franchising could represent a route into securing a successful and profitable future business 'for yourself, but not by yourself'.

• A franchise is a relationship in agreement between two parties, whereby the Franchisor generally controls or regulates the way in which the Franchise owner is to carry on that business.
• Such control by the Franchisor would include, the Franchisor providing the Franchise owner with assistance in the manner in which the business is to be run.
• The relationship between the Franchisor and the Franchise owner is one, which is independent of the other as a legal entity. The Franchise owner makes available the capital and takes inherent risks in doing so.
• There must be an agreement.
• There must a developed system.
• There must be training.
• There must be continuing support.
• There must be a grant of right to operate the business using the system and branding.

Remember franchising allows a franchise owner to be a successful owner running his own business:-

• Be in business for yourself but not by yourself.
• Learn from the success and failure of others.
• Franchising is a process of bottling success and giving it to other people for use in developing their own successful businesses.
• Why would you spend years and the investment required establishing a successful brand when you could buy a franchise which would give you immediate access to a successful business system and a brand name which others have made successful?
• Why work for someone else when you can work for yourself and reap the rewards of your efforts?