People who want to spend more time with family often turn to franchising as a way to start or grow their businesses. But beginning the journey to owning a franchise business can be daunting, and knowing what franchising is can be a challenge. Here are some of the most frequently asked questions about franchising definition.
What is franchising?
In broad terms, franchising is a business model in which a franchisor licenses trademarks and methods of doing business to a franchisee in exchange for a fee. The franchisor also helps the franchisee set up the business (including how goods or services are to be marketed and sold) and provides them with ongoing guidance and support. Franchises are found all over the world, and it is estimated that there are currently over 2.5 million franchise establishments across the globe.
What are the advantages of franchising?
Franchising is an attractive business model for entrepreneurs, as it provides a low-cost entry point into business ownership. It also sets up the business owner to succeed, through access to the franchisor’s marketing, branding and operational expertise. Moreover, the cost of doing business is reduced through shared service agreements (such as shared sales forces, advertising, IT and accounting systems), and through cost of goods savings that franchisors negotiate with suppliers.
What are the disadvantages of franchising?
The main disadvantage of franchising is that it requires the franchisee to give up a degree of autonomy. Franchisees are typically bound to certain rules and regulations set forth by the franchisor. Additionally, as the franchisee is solely responsible for the day-to-day operations of the business, they are expected to abide by the franchisor’s protocols and deliver consistent customer service.
How do I find a franchise that is right for me?
There are many considerations when selecting a franchise to own, such as location, market conditions, cost, and whether the business fits your interests or goals. A professional franchise consultant can help you identify the right franchise business for you. The International Franchise Professionals Group (IFPG) is a membership-based franchise consulting network that provides advice to new franchisees and resources to help them find a successful franchise business.
What are the costs of franchising?
Franchising can vary in cost depending on the type of business. Typical franchise costs include the franchisor’s initial franchise fee, ongoing royalty fees and any other associated costs. It is important to understand these costs and determine if they are within your budget before beginning the process of investing in a franchise business.
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