Multi-Unit Franchise Experts

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Understand the Franchise Definition – Explore Investments

Are you a stay-at-home parent looking for a new way to re-enter the workforce? Do you want to make the jump to entrepreneurship without having to create a business from scratch? Investing in a franchise may be the perfect solution to launching a business with the help of an established brand. Below, we provide the answers to some frequently asked questions about franchising to get you started on your business journey.

Franchising as a concept has been around for over a century and is a popular way for entrepreneurs to start their own business with the help of an already established brand. But not all businesses have the same franchising model, and there are numerous advantages and disadvantages to consider before signing up for a franchise. The International Franchise Professionals Group (IFPG) helps entrepreneurs learn more about a potential franchise opportunity and work through the due diligence process.

What is a Franchise?

A franchise is a business model where a larger established company, the franchisor, earns an ongoing payment or royalty for allowing another company, the franchisee, to use their trademark and market the franchise’s products and services under its established brand. The franchisee owns and operates their own business, but receives guidance, training, and assistance from the franchisor. The franchisee also pays the franchisor an initial fee and ongoing royalties for the use of the established trademark and the rights to sell the franchise’s products and services in specific geographic regions or territories.

What are the Different Types of Franchises?

The two most common types of franchises are business format and product or trade name franchises. A business format franchise is the most common type of franchise and includes the franchisor’s trade dress, uniformity of products, services, and operations, and assistance with training, marketing, and accounting systems. Product or trade name franchises are trademarks or specific products trademarks with no operational assistance other than obtaining the products from the manufacturers.

What are the Advantages and Disadvantages for Investing in a Franchise?

The most important advantage of investing in a franchise is the availability of an established brand and customer base. This provides franchisees with a lower risk of failure and makes it easier for them to launch their business. Franchisors also provide initial and ongoing assistance to franchisees, offering guidance on improving their operations and increasing their revenue.

However, there are some disadvantages to consider as well. Start-up costs for a franchise can be high, and it can take time to turn a profit. Franchisees must adhere to the franchisor’s policies and processes, which can be restrictive. Additionally, investing in a franchise means that the franchisee is totally reliant on the performance and reputation of the franchise’s umbrella brand.

Is Franchising Right for Me?

Ultimately, it is up to the individual franchisee to decide if investing in a franchise is the right move for them. Working with the IFPG, an experienced franchise broker group, can help aspiring entrepreneurs assess a potential franchise opportunity, evaluate the due diligence process, and determine the best franchise model for maximum return on their investment.

Topics:

Franchise Definition,

Franchise Investment,

Franchising

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