What is Franchising?
An Easy Breakdown of How Franchising Works
From the franchisor’s perspective, franchising is a very popular way for a successful businesses to add great talent to their teams and finance their growth by recruiting franchises to become carefully selected partners. From the franchisee’s perspective, purchasing a franchise from a successful business gives the franchisee access to a proven formula of brand systems training and support at a fraction of he cost of doing it themselves.
In simple terms, franchising allows a business owner (the franchisor) to license their successful business model, brand, and operational systems to someone else (the franchisee), who runs a location of that business.
Here’s a quick look at how it all works:
The franchisor owns the brand and business system. They’ve created a proven business model that’s successful in the market. A franchisee is someone who wants to start their own business but prefers the stability and increased certainty of using a pre-existing model. The franchisor provides the franchisee with tools, training, and ongoing support, ensuring that every franchise location operates similarly and succesfully.
Franchising allows a company to grow quickly by having franchisees finance and operate new locations. Since each franchisee is investing their own money to open and operate a location, the franchisor can expand without directly owning each store, while still maintaining control of their successful formula.
Franchisees get the advantage of starting a business with a recognized name, established customer base, and proven success. This reduces some of the risks that come with starting a new, independent business from scratch. Additionally, the franchisor typically provides training, marketing support, and ongoing guidance.
To use the franchisor’s system and brand, the franchisee usually pays an initial fee and ongoing royalties, which are a percentage of the revenue. This helps the franchisor maintain and grow the brand while supporting franchisees.
Franchising is often a win-win for both parties. The franchisor grows their business without taking on the direct costs and risks of opening new locations, while the franchisee gets a chance to operate their own business under a successful brand.
Franchising is a great way for businesses to expand and for individuals to own their own location within a proven and successful brand and business system. With the right guidance and support, it’s a model that works incredibly well for both sides, leading to mutual growth and success.
