Franchises #101; The Basics

So, what exactly is a franchise? Here is my definition;

"The entrepreneur {The franchisor}, has invented a business, and it's model, and is looking to replicate it, by partnering with people that would like an opportunity to own their own business, while building equity for themselves and their families. The franchisor’s own money is invested up front, while company growth is leveraged by using other people’s money. {The franchisees}”

Here it is from Wikipedia;

“Franchising (from the French for honest or freedom} is a method of doing business wherein a 'franchisor' authorizes proven methods of doing business to a "franchisee" for a fee and a percentage of sales or profits. Various tangibles and intangibles such as national advertising, training, and other support services are commonly made available by the franchisor, and may indeed be required by the franchisor."

When I do presentations on franchising at any one of a number of venues, I tell my audience that franchising is basically a license. You are a licensee of the franchise company. Your license, in which you pay an upfront Franchise Fee for, includes the right to use the franchisor’s signage, logo, advertising materials, business systems, software, training manuals, operations manuals, and various other things that help you start-up your operation.

You will be paying royalties, { a percentage% of your sales } usually on a monthly basis, during the entire length of your franchise agreement. Most franchise agreements are 10 years, and can be renewed.  There is usually a renewal fee of a few thousand dollars.

The advantages of buying a franchise;

When you invest in a franchise of your own, you are investing in someone else’s well thought out {hopefully} system. This system should enable you to ramp up faster than if it was a pure, untested, and unproven start-up business. The faster you can get to break-even, the faster you can start making some profit. Business moves so fast nowadays. Doesn’t it make sense to get to market as quickly as possible? Franchising can do that. In addition, you get;

• Training
• Technology
• Support
• Real estate assistance
• Marketing plans
• Branding

And much much more!

Next-Disadvantages of buying a franchise