Franchising is a popular approach for running a business and is commonly associated with many well-known restaurant chains, beauty brands, and other established businesses at local, national, and international levels. But, how does a franchise work?
The franchise model
A franchise is a business that has many separate chains or branches operating in the same way throughout a local or wider area. Each branch effectively looks the same as another, using the same name, company logo, and branding, and offering identical products or services.
Who is involved?
Franchising involves a joint venture between a franchisor and a franchisee. A franchisor is the business owner, and the franchisee is the individual who takes on board operating a branch of the business.
Essentially, a franchisee invests in the franchise business, but this doesn’t mean to say they own a share of it. According to The Telegraph, a franchisee buys the rights to use a franchisor’s trademark name, product, or technical operations. This allows the franchisee to make the same products or offer the same services as the franchisor.
Choosing a franchise
Anyone interested in getting involved with franchising would first need to see what kind of options are available. It is surprising how varied franchising opportunities are, ranging from working in education, care, IT, cleaning, beauty, fitness, and management franchises, to name but a few. Many people are drawn to franchising because there are lots of home-based franchises to choose from.
Many people assume that you need prior knowledge of running a business or expertise in a particular sector, but a franchisee will be given full training from the franchisor, so this isn’t the main aspect to focus on when deciding which area of franchising to get involved with. Ideally, franchisee candidates should choose a franchise that interests them the most and will fit their lifestyle and goals.
The franchisee will also need to look into the financial aspects of operating a franchise, as investment costs can vary. In some cases, you may pay a flat fee to buy into the franchise or a percentage of the sales, or even both.
How a franchise is run
While a franchisee will set up a new branch of the franchise, this isn’t quite the same as setting up a completely new business from scratch. This is because the franchisee will be using a brand name that has already been established and comes with a proven business model, offering products or services, as well as marketing methods, that are tried-and-tested. Therefore, a franchisee will have a head start on running a business, compared to independent newbies, and this is one of the main benefits of franchising that people are attracted to.
Essentially, the franchisee will be buying into a package for a set period of time. Because this business package offered by the franchise brand uses a proven business model, this means that it is less risky than setting up as an independent retailer. This is beneficial to both the franchisee and the franchisor.
Training and guidance
Since every business within a franchise group utilises the same branding, product or service offering and business model, it is imperative that the franchisor provides the franchisee with the information they need to ensure this compliance can occur.
The franchisee will receive full training prior to setting up the franchise and will be given an operating manual covering all of the aspects involved with running the individual branch. The franchisor may help with finding suitable business premises for the franchisee if they aren’t working from home.
Since the franchisee will be expected to run the franchise in a pre-determined way, as agreed by the franchisor, both parties will keep in regular contact with each other, providing feedback and updates. The franchisor may also frequently inspect the franchise premises to make sure rules and regulations are being adhered to, and, crucially, the expected standards are being delivered to clients or customers.
Business freedom
However, just because a franchisor sets rules on how the franchise needs to be run, this doesn’t mean to say that the franchisee is completely governed by strict regulations and guidelines in all aspects of operating the business.
A franchisee will be given autonomy to run the business themselves and is able to have freedom and flexibility in a number of different aspects. For instance, the franchisee can choose their own hours of work, so they may decide to fit their work around childcare or other commitments. They may also have the freedom to manage the recruitment process as well as how they market the business.
While the franchisor will be on hand to offer support to the franchisee and guide them when needed, the franchisee will be responsible for making a success of the business themselves and will be expected to show initiative and be motivated to help make the business grow and turn a profit.