What is a franchise and how does it work

Difference between owning you own business and owning a franchise

A franchise business is a business that has been created by someone or a team of people who have decided to grant the right to others to sell the business model's proven or well-recognized goods or services under a predefined set of terms and conditions. The relationship between the Franchiser and Franchisee is bound together through a Franchise Agreement, which outlines the terms and conditions of the franchisee.

A franchise is different then running your own business where you buy or rent a building, develop the building into the business you want, buying supplies, etc. With a franchise, you already have a name in most cases, it is already a well-known product and is popular. The franchise will generally already have a store or location in mind, and will have it completed. The inside of the store is up to the franchisee to develop as well as any landscaping that may need to be done in most cases.

A franchise business will also offer training, which is something that doesn't happen if you go into business yourself. Training and learning will be up to you. However, one of the downside of franchise operation is that the franchisee will generally need to pay not only a fee to the franchiser, but a monthly royalty on sales.

Franchising-a reduction of risks

Probably one of the advantages of franchising appears to be less risk in franchising than in owning your own business. Franchises generally get up and running a lot faster that any business you have yourself, and are profitable more quickly. A franchise can also get a better deal on supplies because they generally buy them in bulk for the entire chain and there is the instant recognition form people who already know the product. Would you buy chicken from something called Uncle Joe's Chicken Coop or will you be more likely to buy from Kentucky Fired Chicken?

There is the other advantage, the most important advantage; the customer. The customer will automatically know what they will be getting and know that the quality of the product or service at one location will be comparable to that of other locations. They know what the product is and they know what they like about it.

Franchising is not just fast-food

Although a franchise business is generally synonymous with the vast amount of fast-food franchises such as McDonald's and Subway, there are others that are just as famous, but perhaps not known as franchises. For example, Super 8 Motels is a franchise, and these types of franchises are generally known to be good profit generators.