Franchising

Proven fact. It's believed that a franchise business has a much greater chance of surviving the first 3 years of business compared to one that starts from scratch.

Given you decide to start a business this year, you can either become a franchisee or you can go the hard way and start your business from zero. The decision is all up to you. But, before making your decision you need to compare the risks and costs of buying and running a franchise business to those of starting from zero.

Franchise terminology

The "franchisor" is the owner of the business who decides to expand their establishment by either opening new branches or selling franchises.

The "franchisee" is the one who decides to buy and run a franchise operation from the franchisor.

The Franchising World

There are too many franchise opportunities out there. Therefore, you need to take your time and do your research before choosing a franchise opportunity. There are many fields that you can choose to go into and start a franchise business. For instance, you might decide to try franchising in the mail order industry. For the latest news and articles on the global franchising spotlight go and try Franchise-International.net.

A type of franchising - "Business Format Franchising"

This is a type of franchising where you buy a complete business system including the way the business trades. Franchises trade under a common name for example McDonalds, appearing to be from one big organisation rather than operating as a series of independent businesses.

How it works

The business starting a franchising programme under its name needs to run a pilot project for a couple of years so that all initial problems of running a business are eliminated. Preferably there should be more than one pilot which demonstrates that the business idea can be repeated.

The owner of the business (the franchisor) then goes on to expand their business by opening new branches and selling franchises. The franchisor develops or starts a franchise operation. This is where you come into play if you want to start a franchise business. The franchise operation should be accompanied by an operating manual which demonstrates and shows how each franchise business should be setup and run.

The next stage for the franchisor is to get or find suitable people to buy franchises and run a franchise business in different regions of the country. The franchisor puts careful consideration into who they sell franchises too and they make a judgement whether that person will be able to develop the business in a particular region of the country.

On the other hand, a franchise buyer should investigate a pilot operation and its manual before buying the franchise and subsequently running a franchise business. Usually when a franchise is bought, a contract is signed by both parties involved and the franchise buyer puts down an initial fee.

After selling a franchise, the franchisor should continue giving the franchisee support, advice and they should also continue marketing and promoting the business. The franchisee again the one running a franchise business normally pays the franchisor a monthly fee or an annual payment. This obviously differs depending on the contract.

Products are purchased from the franchisor which is another way the franchisor makes money instead of getting a percentage of the sales. The franchisor also has the right to make visits to the franchisee's business to examine company accounts.

At the end of the contract which can last between 5 to 10 years or even more, the contract can be renewed or the franchisor can deny this. The decision is obviously based on the performance of the franchisee and the way they're running the franchise business.

The generalisation conclusion

Hopefully, this brief guide to franchises gives you an insight into the industry. It's only a brief guide and it serves its purpose as an overview. Anyway if you're planning on buying a franchise yourself and running a franchise business or if you plan to sell franchises, then I hope it works for you.