Franchising Overview (2024)

FAQs

What is the overview of franchising? ›

A franchise is an agreement between two independent parties: the franchisor and the franchisee. One party (the franchisor) offers its business model, brand name, and intellectual property to another party (the franchisee) that will use the resources to start a business according to the existing system.

Business Format Franchise

The franchisor offers a detailed plan and procedures on almost every aspect of the business, provides initial and ongoing training and support. Business format franchising is the most popular type of franchise system and the one generally referred to when talking franchising.

A franchise (or franchising) is a method of distributing products or services involving a franchisor, who establishes the brand's trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system.

Franchising is an arrangement where franchisor (one party) grants or licenses some rights and authorities to franchisee (another party). Franchising is a well-known marketing strategy for business expansion. A contractual agreement takes place between Franchisor and Franchisee.

Franchise: The Pros

By purchasing a franchise, you get a turnkey business that is ready and waiting for you to take the reins. If you are detail-oriented, good at following directions, and comfortable with established systems, franchising provides a quick and easy way to become a business owner.

As the owner of their business, the franchisee enters into a license agreement with the franchisor and obtains the right to do business using the franchisor's operating methods, brand name, trademark, and service marks in offering the system's products and services.

Brand recognition and consistency are key elements to a successful franchise.

There is a wide variety of types of franchise ​structures used in the industry today. There are two main types of franchising, known as Product Distribution Franchising (Traditional Franchising) and Business Format Franchising, which are conducted under a variety of franchise relationships.

Franchise models that offer the highest return on investment are those that have a proven track record of success, a strong brand name, and a loyal customer base. According to Franchise Direct, some of the most profitable franchises models include McDonald's, 7-Eleven, and Dunkin' Donuts.

A franchise is a type of retail business in which an individual or group is granted the right to market a company's goods or services within a certain territory or location.

What is a franchise example? ›

Franchises are an extremely common way of doing business in the U.S. It is hard to drive more than a few blocks in most cities without seeing a franchise business. Examples of well-known franchise business models include McDonald's (NYSE: MCD), Subway, United Parcel Service (NYSE: UPS), and H&R Block (NYSE: HRB).

Find business partners.

You might be able to start a franchise without any money if you find partners. These partners will share the costs (and ultimately the profits) of your franchise. Some people approach friends or family, who can provide you with money in exchange for some percentage of ownership in the franchise.

The exact earning potential will depend on several factors, including the type of franchise, the location, the investment level, and the franchisee's ability to effectively operate and manage the business. On average, franchisees can expect to earn a profit of 4-12 percent of their gross revenue.

It's important to note that while restaurants are the most popular type of business for franchising, there are other types of businesses that can also be franchised, such as convenience stores, grocery chains, and medical services.

Single-Unit Franchising

The most common way of franchising is the single-unit franchise. This is where a person or company buys a single unit to operate in the company's name in a specific location. As you expand, you'll have increasing numbers of franchisees operating their businesses in different areas.

Single-Unit Franchise Agreement

This type of agreement is the simplest and most frequently used. New franchisors are particularly keen on these franchise arrangements, as they're an easy way to take the first step into the world of franchising.

Manufacturing franchises

The best example of this would be a soft drinks company. The parent company will produce the concentrated syrup and then sell it, as well as the right to use its brand name and trademarks, to a bottling company.