Multi-Unit Franchise Experts

How Do Franchises Work

Exploring Franchising?

Are you tired of developing your corporate career and feeling unfulfilled? Are you looking to start down a business path, without the hassle of creating a brand new business from the ground up? Maybe considering franchising is the answer for you. Franchising is a popular business model that offers investors the opportunity to join an already established and trusted brand. In franchising, you become a “franchisee”—an authorized partner of the brand—while the parent brand becomes the “franchisor.” The partnership between the two parties enables franchisees to buy and operate a business with the aid of the franchisor. Here, we’ll answer some of the frequently asked questions about franchising and uncover the key details you need to know.

What is Franchising?​

Franchising is an agreement between the franchisor (the brand) and the franchisee (the buyer) that enables the buyer to own and operate a business that has been established under the franchisor’s brand concept. In addition to being able to use the franchisor’s products or services, the franchisee receives assistance from the parent company in areas such as training, marketing and operations.

Who Can Become a Franchisee?​

Anyone seeking to invest in a business can become a franchisee. But the franchisor will typically require that the franchisee meet certain criteria. This usually includes having the financial ability to keep up with their financial obligations (i.e., payroll costs and rent) as well as having the necessary business skills to run a franchise.

How Much Does it Cost to Become a Franchisee?​

The cost of becoming a franchisee can range greatly depending on the franchisor and the size and scope of the agreement. The upfront cost of a franchise can include franchise fees (for licensing of the business concept), start-up costs (such as equipment and decor items for the location) and the cost of purchasing the necessary tools and materials to operate the business. In addition, franchisees may be required to pay ongoing royalty and marketing fees, which are typically a percentage of the franchise’s sales. It’s important to keep in mind that these upfront and ongoing costs may include not only the fees specific to the franchisor, but also any local and state taxes or fees.

What Are the Benefits of Becoming a Franchisee?​

For franchisees, the benefits of franchising go beyond the financial ones. One of the biggest draws of being a franchisee is the ease with which one can start a business. The franchisor provides the business concept, support and guidance, so franchisees don’t have to worry about designing a business plan from scratch. Additionally, as the franchisee is operating under the franchisor’s established brand name, they are more likely to benefit from the brand’s existing customer loyalty and recognition.

Where Can I Find More Information About Franchising?​

If you’re interested in learning more about franchising, there are a variety of resources available. The International Franchise Professionals Group (IFPG) is a membership-based franchise consulting network with more than 1,300 franchisors, franchise consultants and vendor members. Additionally, the U.S. Small Business Administration has a helpful website with in-depth guidance for potential franchisees.

Topics:

Franchising,

Franchisee,

Franchise Fees

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