Aug 15, 2017
Many entrepreneurs have achieved success through franchising. This effective method of business expansion is responsible for the ubiquity of those brands that seem to pop up on every city corner and suburban strip mall. But what is a franchise really? For something so common, the franchise definition can be quite complicated.
Essentially, a franchise is built on the relationship between two entities: the franchisor and the franchisee. Often a large, well-established company, the franchisor provides oversight, support, and branding to multiple outlets. These outlets are owned and operated by individual franchisees, who pay an initial franchising fee as well as ongoing royalties to the franchisor for the right to use their trademarks, sell their products, and employ their method of business operation. As a middle ground between starting a company from scratch and purchasing an existing one, buying into a franchising offers new business owners a solid mix of independence and structure.
The outlook for prospective franchise owners is good. Early in 2017, Franchise Direct reported that the franchise sector has posted a growth rate almost 2% higher than total business growth for the past five years, a trend which is expected to continue.
Becoming a franchisee helps mitigate some of the risks of starting a business. You’ll be using a brand name that customers already recognize and a tried-and-true method of operation.
Other advantages of buying into a franchise include:
The definition of a franchise may make it sound almost easy on paper. But it’s important to carefully plan and consider all aspects of the decision before you take the leap. You are, after all, taking on the responsibility of owning a business.
Remember that not all franchisors are the same. Make sure to ask questions of a prospective franchisor so that you fully understand what the agreement entails. It’s also important to ensure that you have realistic expectations. The International Franchise Association has posted a detailed list of questions you should ask yourself before deciding if you’re ready to be a franchisee.
Understanding a franchise is the first step towards determining whether this method of business ownership is right for you. With the right preparation and foresight, you can join the ranks of those who have found success in running their own franchise.
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