Franchising

Franchising is a contractual arrangement between two parties that is found both in retailing and in international markets. This form of licensing has grown tremendously in the last 10 years or so (Lamb, Hair, & McDaniel, 2002, p. 113). The typical type of franchising found in health care is that of business format franchising. The originator of the business format, such as Interim HealthCare and its health care staffing services (Brown, 2002, p. 3), grants the rights to operate the format to an entrepreneur who wants to manage a business with some ongoing training and support. The originator is called the franchiser, and the entrepreneur who is granted operating rights is called the franchisee.

A person or business looking to be a franchisee can expect to pay approximately $150,000 in initial costs (Brown, 2002, p. 1). Royalty fees are also charged on a monthly, or more frequent, basis. These fees usually range from 3% to 7% of a franchisee's gross revenues. Additional fees vary from franchiser to franchiser. Other requirements and expenses to be carried by the franchisee include advertising expenses; equipment purchases; inventory purchases and maintenance; hiring, training, and evaluation of employees; building layout and signage; and attendance at conventions and training seminars (Lamb et al., 2002, p. 440). Again, these expectations vary from franchiser to franchiser.

A franchise is a legal, contractual agreement between the two parties, and if the franchisee fails to abide by the terms of the contract, the franchiser can take away the franchising rights. For example, if one notices the sudden closing of several fast food restaurants in one chain in a large city, most likely what has happened is that the franchisee failed to fulfill the terms of the franchise agreement and thus lost the right to operate those restaurants in that city.

Care of seniors in the home and medical staffing are two key service areas of health care that are projected to grow exponentially in the years to come (Brown, 2002, p. 3; Smith, 2002, p. 1). In fact, the health category had a 62.8% increase in the number of franchise units from 2000 to 2001, according to Entrepreneur magazine (Smith, 2002, p. 2). Franchising opportunities are available in these and other areas of health care services. Resources are available to anyone who is interested in becoming a franchisee. The industry trade group, the International Franchise Association, offers many resources online at http://www.franchise.org. Other sources available to potential franchisees include Franchise (http://www.franchisetimes.com), the Franchise Network (http://www.bison1.com), and FranCorp, a large franchising consulting group (http://www.francorp.com) (Brown, p. 2).