how do franchises work?
This article can help you evaluate whether owning a franchise is right for you. It will help you understand how franchises work, including your obligations as a franchise owner. A franchise typically enables you, the investor or “franchisee,” to operate a business. By paying a franchise fee, which may cost several thousand dollars, you are given a format or system developed by the company (“franchisor”), the right to use the franchisor’s name for a limited time, and assistance. For example, the franchisor may help you find a location for your outlet; provide initial training and an operating manual; and advise you on management, marketing, or personnel. Some franchisors offer ongoing support such as monthly newsletters, a toll free 800 telephone number for technical assistance, and periodic workshops or seminars.
The idea is this- say I have a great business idea for a small restaurant, and I want my restaurant to become a big chain, but I don’t have the resources to incorporate. Instead, I can become a franchisor and authorize other people, franchisees, to operate their own restaurants using the tools I already developed. In return, the franchisee has to pay the franchisor a franchising fee and royalties- a percentage of the sales. Details of this are put down in a franchise agreement. What does the franchisee get? The franchiser may provide the franchisee with any of the following: • Trademarks and rights to operate under the franchise’s name • Methods, recipes, suppliers’ contacts, uniforms, things you need to run your business. • National or international advertising Training for employees. As such, franchising works best for businesses that can be easily operated and duplicated, with large geographical appeal and a good record of profitability. Advantages and disadvantages of franchises Fr
