The Oxford Dictionary's definition of a franchise is:
“An authorisation granted by a government or company to an individual or group enabling them to carry out specified commercial activities, for example acting as an agent for a company’s products”.
Beyond this however and more generally it can be considered as somewhat of a hybrid that mixes the best of large businesses with small businesses so that they can mutually benefit from one another.
For the franchisor it provides capital to expand, an untapped talent pool and minimalised growth risks; and for the franchisee it provides an instantly recognised brand to work with, support and a somewhat prebuilt business.
If you are considering becoming a franchisee then there two main forms of franchise, with these being a product distribution franchise and a business format franchise.
This form of franchise would involve you selling the franchise’s products onto your own clients within a territory for a profit.
It’s pretty comparable to any supplier/dealer arrangement, although you benefit from support in growing the business as your own.
This form of franchise is altogether more comprehensive in that there are methods that are provided for operating the business on a day to day basis.
Further to these two main franchise forms, are three main formats of franchise agreements that are available:
Whilst there are my benefits to becoming a franchisee, so too are there drawbacks, which include:
Despite these downsides however franchising is a form of business that has seen unpanelled growth and if you dedicate yourself to the right franchise there’s a world of success that awaits.
If you are thinking about franchising your business then, for starters, you need to consider factors such as:
Is your business suitable to franchising?
To franchise your business it will need to meet certain criteria, such as:
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