What Is A Franchise?

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Reading Time: 2 minutesHave you ever thought about starting your own business?

Perhaps you’ve dismissed the idea because you were worried about having enough capital, experience and a share enough of the market to get it off the ground. If you are really interested though but would rather not build it completely from the ground up, a franchise may be the right type of business for you.

The idea of franchises may not be a new one. But it’s a type of business that’s often misunderstood. To help you understand the concept better, we’re going to discuss the subject in the following post.

How Does A Franchise Work?

A franchise is a form of business that involves an existing company allowing third parties to operate under the same trade/brand name, with access to their sales, distribution or manufacturing channels. Franchises are usually given with the provisory that the owner receives a percentage of the profits from sales and a one-off initial fee.

There are three different forms of franchises:

Manufacturing Franchises

Manufacturing franchises are given licences to produce services and goods with full use of the brand name. You will find that many food and drink companies use this form of business, as do many wholesalers.

Product Distributor Franchises

Product distribution franchises are when a franchisor gives permission to franchisees to sell their branded products and offers them a licence to use the logo, without ongoing support running their business. This is closely related to a seller/supplier kind of relationship, with the major difference being it’s all branded.

Branded petrol stations often operate as this kind of franchise with the brand name being used and the fuel being supplied. Everything else is left to the franchisee to decide.

Business Format Franchises

Business format franchises are the most common type. They involve a business agreement between a franchisor and a franchisee where they give permission for them to operate using the brand name and all other branding, the same business model.

In addition to all that the franchisee will also be given numerous assets and guidance and support will be given as part of this particular franchise agreement.

Which Companies Offer Franchising Opportunities?

Interestingly, as you are probably aware, some of the biggest companies in the world offer opportunities for individuals to start up franchises. Most see this as part of building the brand. There is no shortage of interesting sectors to have a franchise in, as there are opportunities in everything from hospitality and catering to banking, beauty and retail.

Some of the biggest and most successful companies that offer franchises include:

Where Can You Find Franchising Opportunities?

There are various resources, like Franchise Local, where you can look at the franchising opportunities currently available. You may also be able to start one in a specific area if you know a business is not well represented in that location and can convince them there is enough interest.

Whether you had given franchising consideration in the past or not, you now understand a bit more about what is involved in this intriguing and exciting type of business.

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