What is franchising?
Franchising is a way of distributing products and services. The original business owner (the franchisor) grants a licence for the use of the trademark or trade name for a fee. The person who buys the franchise (the franchisee) is allowed to use the franchisor's business name and operating system to set up the business. As a franchisee, you pay the franchisor a certain amount (royalties) from your franchise's profits. Normally, the franchisor would draft a franchise agreement with you that includes details about how the franchise will be run.
What are the advantages of owning a franchise?
- You don't have to come up with an idea for a new business.
- You get help with business start-up (equipment, suppliers, training).
- You can buy your supplies in bulk.
- Your business benefits from existing brand name recognition.
- An established supply chain and customers are already in place.
- Buying into a successful franchise can be profitable.