Business franchising is a great way for entrepreneurs to get into business without having to create a new concept from scratch. This can be a cost-effective way of getting into business as the franchisee can benefit from the established reputation and brand of the franchisor. For those entrepreneurs who are looking for an established and reliable business model, franchising can be a great way to get started.
What is Franchising?
Franchising is a business model in which the owner (franchisor) of an established brand and business concept grants a license to another party (the franchisee) that allows them to operate a business using the franchisor’s system.
The franchisee pays an initial fee for access to the franchisor’s proprietary information, as well as ongoing royalties. The franchisor provides the franchisee with support, such as marketing materials, training and advice on how to run the business.
Popular Business Franchise Examples
Below are five popular business franchise examples:
1. Subway – With over 40,000 locations in more than 100 countries, Subway is one of the most popular fast food franchises in the world.
2. McDonald’s – McDonald’s is the largest fast food chain in the world with over 36,000 locations.
3. 7-Eleven – With over 55,000 stores worldwide, 7-Eleven is the largest convenience store chain in the world.
4. Starbucks – Starbucks is the largest coffee chain in the world with over 28,000 stores.
5. Burger King – With over 15,000 locations in more than 80 countries, Burger King is one of the most popular fast food franchises.
Advantages of Franchising
There are many advantages to buying into a franchise, especially for entrepreneurs who want to get into business without developing their own concept from scratch.
- Franchising can be a less risky way to start your own business
- You also benefit from the franchisor’s reputation, branding, and marketing materials.
- You can benefit from the existing brand recognition of a franchise
- There is usually more support available from the franchisor
- Franchises often have proven business models that you can follow
- You may find it easier to get financing for a franchise than for a start-up business
Types of Franchises
1. Job franchises
A type of business model in which the franchisor assigns specific roles to each franchisee. The franchisor is responsible for setting up and managing the business, while the franchisees are responsible for delivering services according to the terms established by the franchisor.
2. Product franchises
Product franchises involve selling a specific product or service under the franchisor’s brand. The franchisee is responsible for marketing the product or service and providing customer support, while the franchisor provides training and assistance with setting up the business.
3. Area franchises
They involve granting exclusive rights to a specific geographical area. This type of franchise can be beneficial for both the franchisee and the franchisor as it limits competition within the defined area, provides a more cohesive customer experience, and helps build brand loyalty.
4. Business-format franchises
Business-format franchises are the most common type of franchising arrangement and involve the franchisee following a complete business format, such as procedures on how to run the business, customer service policies, pricing structures, and marketing plans.
5. Investment franchises
They involve the franchisor providing a substantial investment to the franchisee in return for an ownership stake in the business. This type of arrangement is attractive to entrepreneurs who are looking for investors but don’t want to give up complete control of their business.
6. Conversion franchises
Conversion franchises involve taking an existing business and converting it to a franchise. This type of arrangement can be beneficial for both the franchisor and the franchisee as it allows the franchisee to benefit from the franchisor’s established brand, while also giving the franchisor access to an already-established customer base.
1. Single-unit owner
This is an individual entrepreneur who owns and operates a single franchise unit, often working onsite.
2. Multi-unit owner
This is an entrepreneur who owns multiple franchises in the same or related fields.
3. Area developer
An experienced businessperson who purchases the rights to develop a specific geographic area by setting up multiple franchise units within it.
4. Master franchisees
A businessperson who purchases the rights to a franchise in one region or country, and then grants sub-licenses to other entrepreneurs for that region or country.
When is the best time to franchise?
Before deciding if franchising is the right move for you and your business, here are some questions to consider:
- Do you have an established brand that people recognize?
- Do you have a successful business model that can be replicated?
- Are your products or services in demand in multiple markets?
- Do you have the resources to handle the legal and financial aspects of franchising?
- Do you have an effective training program for potential franchisees?
Franchising is a great way to grow your business and expand into new markets. It can be beneficial for both the franchisor and the franchisee, providing access to an established customer base, brand recognition, and a proven business model. However, it’s important to understand that franchising is not for everyone. Careful research and consideration of your options should be taken before deciding to enter into a franchise agreement. With the right research and preparation, franchising can be a great way to take your business to the next level.
1. What is Franchising?, 2022
- Advantages and Disadvantages of Franchising, 2022
- Types of Franchises, 2022