What is a franchise?

What is a franchise? All about franchising

Franchising is a very complex area, but if you do your research properly and as a consequence manage to find the right franchise for you, it can be very rewarding. Before however you start to look at franchise opportunities of interest, you need to initially understand what franchising is and if it is the right route into business for you.

Following our franchise guidelines as outlined in this section will help you to answer the important questions to ask when buying a franchise business such as “why buy a franchise?”, “I want to buy a franchise, where do I start?”, “What do you need to buy a franchise?” and “how much is it to buy a franchise”.

Our “buying a franchise advice section” will help you to answer these questions and many more. We will take you through each stage of the franchise decision making process, giving guidance and clarification where possible. As well as providing a comprehensive franchise guide, we, and other franchise experts, are also on hand to answer any questions you may have.

Let’s start at the beginning and ask the question, what is a franchise?

What is a franchise?

In simple terms, a “franchise” is an agreement between two parties which allows one party i.e. the franchisee, to market product or services using the trademark and operating methods of the other party i.e. the franchisor.

There are two types of franchise methods – business format franchising and product and trade name franchising.

Business Format Franchising

The most common method in the UK is Business Format Franchising. Using this method, when you buy a franchise, the franchisor grants you, the franchisee, the use of their logos and trademarks, as well as a turn-key system for doing business. This includes helping the franchisee with site selection, store layout and design, recruiting and training staff, marketing the business, preferred supplies contacts and more.

The franchisee in return has to pay an upfront franchise fee as well as ongoing royalties to the franchisor. The franchisor uses this money to help further develop the system through marketing, product and market research, and ongoing support.

There are many examples of business format franchising opportunities, including – food franchises, automotive franchises, estate agency franchises, retail franchises, recruitment franchises, children’s franchises, coffee franchises, pet franchises, fitness franchises to name a few.

Many of these are ideal franchises for women, many are home-based franchises, part-time franchises and mobile franchises, and not all required a high level of investment, some are considered low-cost franchises.

Product and Trade Name Franchising

The other franchise method is Product and Trade Name Franchising. This type of franchising does not involve royalty fees. The most important thing that the franchisor provides to someone buying a franchise in Product and Trade Name Franchising is the product. The franchisee is required to purchase the product or range of products exclusively from the franchisor. The franchisor also provides national marketing and advertising campaigns, logos and trademarks.

This type of franchising is mainly associated with industries such as petroleum, soft drink distribution and automotive.

Product and Trade Name Franchising has three distinctive characteristics:

The franchisee sells goods which are supplied by the franchisor or a person affiliated with the franchisor;
The franchisor helps the franchisee to secure accounts or, depending on the type of business, locations or sites for rack displays or vending machines.
Within 6 months of opening the business, the franchisee must pay the franchisor or a person affiliated with the franchisor
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