What is Franchising?

Franchising 101:

Franchising is an interdependent business relationship that allows a number of people to share brand identification, a proven method of doing business, and marketing and distribution systems.

To be successful in franchising, you must understand the business and legal ramifications of your relationship with your franchisor. Your focus must be on working with other franchisees and company managers to market the brand, and fully use the operating system provided. Other franchisees are not your competitors. In fact, they should work with you to establish and reinforce the brand dominance in your area.

It is important to note that when franchising, you own the assets of your business, but how you operate the business is subject to the license agreement for the franchise. You (franchisee) are licensed to operate our business (franchisor).

Franchising offers many benefits over independent ownership. A good franchise will offer:

Franchising is successful because consumers are very brand-driven; thus, an established brand garners significant recognition.

While franchising generally decreases the risks of business failure, it does come with some costs. The cost for this security usually comes in the form of the initial franchise fee, a royalty fee, and a marketing/advertising fee.