Franchises

This is Bob Doughty with the VOA Special English Economics
Report.

Success does not come easily to a small business. The United
States Small Business Administration says fifty percent fail in the
first year. The government agency says ninety-five percent of small
businesses fail within five years.

Many owners believe one way to improve their chance of success is
to buy an already recognized business through a franchise. A
franchise provides a name and products that people know. One of the
best known franchising companies in the world, for example, is
McDonald's.

A person who wants to start a franchise must pay a fee. This
amount of money depends on how much the franchising company expects
the new business to earn. To open a McDonald's franchise costs at
least five-hundred-thousand dollars in fees.

Franchise fees for some other companies are only a few thousand
dollars. However, store space, goods and other things needed to
operate a franchise may cost a lot more.

Franchise buyers agree to pay a percentage of their earnings
every year for the right to operate the business. They also must
agree to pay for marketing efforts. A percentage of earnings goes to
national advertising. Another percentage may go to local
advertising.

The franchising company must approve where the new business will
be. The contract agreement will also require the owner to observe a
number of rules. These may restrict where the new franchise can do
business. Contracts usually remain in effect for as long as twenty
years.

Franchise owners must be prepared to work hard. But experts also
say that some companies provide only limited training and other
support. They say owners should make sure they understand what they
can expect, and what is expected of them.

In the United States there are more than three-hundred thousand
small business franchises. The Wall Street Journal says franchises
operate in about seventy-five industries. They produce
one-million-million dollars in sales a year. And they employ one in
every sixteen Americans workers.

Franchises are a very big kind of small business. Like any other
kind of business, though, there is no guarantee of success.

There is an International Franchise Association. The Web site for
the group is franchise-dot-o-r-g.

This VOA Special English Economics Report was written by Mario
Ritter. This is Bob Doughty.