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What  is  a  Franchise  ?


A Franchise is a type of License that a party ( the Franchisee ) acquires to allow them to have access to a Business's ( the Franchisor ) proprietary knowledge, processes and trademarks in order to allow that party to sell a product or provide a service under the Business's name.

Entrepreneurs typically review several types of business ideas before starting a New Business Venture. Franchising is a common Business Model. Franchise Businesses include restaurants, cleaning services, retail stores and hotels. Entrepreneurs may consider Franchise Operations because these Business Models often involve less planning that other Business Models. Each Franchise Operation usually has a unique set of rules Entrepreneurs must follow when running the Business Franchise.

What  is  a  Franchised  Business ?

A Franchise is a Business System in which Private Entrepreneurs purchase the rights to open and run a location of a larger company. The Franchising Company, or Franchisor, signs a Contractual Agreement with the Franchisee, explaining in detail the company’s rules for operating the Franchise. Franchise Businesses come with a number of pros and cons that Franchisees must take into account before signing the contract.
When the Franchisee signs the Franchise Agreements, he or she agrees to the terms of operat-ing that Franchise. The Business Owner is required to operate the business according to the Franchisor’s requirements. The specifics of these requirements are often dictated by the busi-ness itself and the expectations of the Parent Company. In general, though, the contract will include elements, such as location, advertising, owner and staff training, trademark and copyright obligations, renewal opportunities and termination.

Franchises developed in the mid-nineteenth century. Isaac Singer, the Inventor of the Sewing Machine, created Franchises to distribute his machines more effectively to larger areas. The idea of Franchises spread to the Restaurant Industry in the 1950s when Ray Kroc, founder of McDonald’s, began selling Franchises to spread the fast food chain throughout the U.S. and the world. In the U.S., current Franchise Opportunities go beyond fast food chains and include convenience stores, such as 7-Eleven, hair salons that include Supercuts, and hotels that include Hampton Inn.
Benefits of owning a Franchise include the familiarity of the company name and image and training from the parent company in operating the Franchise successfully. Failure rates among Franchises tend to be much lower than among other new businesses, largely because customers generally recognize the company name and know what to expect from the location. What is more, the training usually includes extended support from the Parent Company : they cannot prevent the Franchise from failing completely, but they do provide a Support System for the Franchise Owner.

The primary disadvantage of owning a Franchise is usually the initial cost of buying the rights to operate it. For instance, a McDonald’s franchise can now cost between $1 million and $2 million. In addition, the Franchise Owner might be liable for ongoing expenses - including royalties for using the company’s name - that can cut into profits. Franchise Contracts are usually strict and can become restrictive for some Business Owners, but Franchise Owners must follow the contract to the letter or risk termination and losing the business.

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