What is franchising? A franchise business?
Franchises in the UK operate like this:
The term 'franchising' is used to describe many different forms of business relationships, including licencing distributor arrangements. The popular use of the word has arisen from the development of what is called 'business format franchising.'
Business franchising is the granting of a licence by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade under the trade mark/trade name of the franchisor and to make use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis.
It is simple process - some companies choose to develop their business, not in the conventional way, but by issuing a license to people to sell their product or service. The advantages of this are:
Not having to come up with a new idea - someone else has, and tested it too!
Well-established franchise operations will often have website advertising campaigns and a proven trading record
Good franchisors will offer comprehensive training programmes in sales and indeed all business skills.
Good franchisors can also help secure funding for your investment.
If you are running a franchise, customers will also know that you will be offering the best possible value for money and service as you are part of a much larger organisation.
Who is in Control?
Each franchise is owned and operated by the franchisee. The franchisor retains control over the way in which products and services are marketed and sold, and controls the quality and standards of the business.
The Cost Implications?
The franchisor will receive an initial fee from the franchisee, paid at the outset, together with a monthly management fee or royalty which is usually based on a percentage of annual turnover. In return, the franchisor has an obligation to support the franchise network, notably with training, product development, advertising, promotional activities and with a specialist range of management services.