WHAT IS A FRANCHISE BUSINESS?
Franchise is a right granted to an individual or group to market a company’s goods or services within a certain territory or location. Some examples of today’s popular franchises are McDonald’s, Subway, Domino’s Pizza, and the UPS Store. Franchising has become one of the most popular ways of doing business in today’s marketplace.
There are many different types of franchises. Many people associate only fast food businesses with franchising. In fact, there are over 120 different types of franchise businesses available today, including automotive, cleaning & maintenance, health & fitness, financial services, and pet-related franchises, just to name a few.
An individual who purchases and runs a franchise is called a “franchisee.” The franchisee purchases a franchise from the “franchisor.” The franchisee must follow certain rules and guidelines already established by the franchisor, and in most cases the franchisee must pay an ongoing franchise royalty fee, as well as an up-front, one-time franchise fee to the franchisor.
Today, franchising is helping thousands of individuals be their own boss and own and operate their own business. Franchising allows entrepreneurs to be in business for themselves, but not by themselves. There is usually a much higher likelihood of success when an individual opens a franchise as opposed to a mom and pop business, since a proven business formula is in place. The products, services, and business operations have already been established.
Product distribution franchises simply sell the franchisor’s products and are supplier-dealer relationships. In product distribution franchising, the franchisor licenses its trademark and logo to the franchisees but typically does not provide them with an entire system for running their business. The industries where you most often find this Type of franchising are soft drinks, automobiles and gasoline.
Business format franchises, on the other hand, not only use a franchisor’s product, service and trademark, but also the complete method to conduct the business itself, such as the marketing plan and operations manuals. Some most popular franchising opportunities are in fast food, retail, service, automotive, maintenance, building and construction, business services and lodging industries.
