Starting a franchise business often comes with many questions – from investors who are looking to purchase a franchised business opportunity to those wondering if franchising is right for them. To provide potential investors a better understanding and to help answer their most commonly asked questions, the International Franchise Professionals Group (IFPG) has created this guide.
Below, we outline the most frequently asked questions and provide helpful insight to help investors make the right decisions for their specific situation. Whether you’re just starting to look into franchising or you’ve already found the perfect opportunity, this guide will provide the answers to some of the most common questions about making the jump into franchising.
What is a franchise?
A franchise is a business arrangement in which an existing business (the franchisor) grants the rights to use its trademarks, products, methods, and other aspects of operations to another franchisee in exchange for a fee and percentage of revenue. This arrangement allows the franchisee to become a part of a larger organization while the franchisor can grow their business. The franchisee also benefits from the systems, branding, and support that comes along with being part of the larger organization.
Who are franchisees?
Franchisees are entrepreneurs who take the opportunity to become affiliated with a larger franchise or brand. When a person purchases a franchise, they are required to pay an upfront fee and royalties for the privilege of using the business’s name. As a franchisee, you will be an independent business owner with the support of a larger system.
What is the difference between franchisors and franchisees?
A franchisor is the “bigger” organization while the franchisee is the “smaller” individual. The franchisor sets the policy and procedures in which a franchisee must operate their business, and the franchisor is responsible for providing support to the franchisee such as marketing materials, guidance, and training. The franchisee, on the other hand, is the entrepreneur who pays an upfront fee and royalties, but receives the benefits of being associated with the bigger franchise.
What are the benefits of owning a franchise?
The primary benefit of owning a franchise is the ability to leverage an existing brand without having to start from scratch. As a franchisee, you’ll already have an existing customer base and a proven operating system with proven marketing tactics. Furthermore, franchisees often benefit from the franchisor’s corporate buying power and researched methods that keep you ahead of the competition.
What kind of flexibility does owning a franchise offer?
One of the biggest benefits of owning a franchise is the flexibility it offers. As a franchisee, you have the autonomy to run your business the way you want it while still taking advantage of the support offered by the franchisor. This means you have the freedom to make decisions regarding pricing, operating hours, and staffing, while still having access to the franchisor’s corporate buying power, marketing materials, and consulting.
What type of time commitment does owning a franchise involve?
Owning a franchise requires a significant amount of time and dedication. Depending on the size of your franchise, you may be required to be actively involved in the day-to-day operations, and some franchisees may need to be present in their business locations to ensure everything is running smoothly. However, the time commitment can vary depending on the size of the franchise and the specific industry.
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