Franchise Definition
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July 26, 2013 Ervin Quinto Business Ideas, Business Model Tags: business ideas, business model, franchise
When it comes to business models, the franchise is one of the most reliable and likely to succeed endeavors, because you buy into a success recipe. If you are interested in a franchise definition and further details on the subject, read on, as we are going to elaborate on the subject. To begin with, the simplest franchise definition is that it is the right an individual can receive to sell a larger companys products or services, in a certain location that ideally doesnt already have a retailer to represent them. Some of the most common examples of worldwide franchising are McDonalds, KFC, Subway or others.
However, these are only fast food franchises and we used them as examples because everyone knows them. In reality, there are over 100 types of franchises, businesses which may include health and fitness clubs, banks, automotive retailers, drugstores, beauty salons and so on. When a company manages to create a stable and profitable strategy, the next level is to expand; for many, the solution is franchising, which is usually opening a new store or facility in a new neighborhood, a new town, or even a new country and continent. Nevertheless, knowing the franchise definition isnt enough, especially if you are interested in starting a franchise business as well.
Although the mother company is interested in opening as many units as possible, it doesnt mean that the process is simple. There are numerous aspects to take into consideration, and they are not going to leave their brand be associated with someone who doesnt do it justice. The person that buys into a franchise is called franchisee, and he/she purchases the franchise from the franchisor. Thus, the franchisee has to meet certain requirements and follow certain guidelines in order to be suitable for consideration. A business plan and strategy have to be involved, and the franchisees must prove that the location they have in mind is suitable, and that there is a market for the products or services they offer.
Among others, the franchisee also agrees to pay a one-time fee to get into the business and prove his or her interests are serious, but they also have to pay royalties, which are periodical payments from the profits of the franchise. Indeed the franchise definition is not difficult to understand, and more and more people are interested or already into the franchise business. This is because consumers love an easily recognizable brand due to the fact that it gives them a certain feeling of security; knowing you always get the same services, the same quality, makes them come back constantly, and become long-term customers. Moreover, since the development of globalization, people can have the same hamburger all over the world; they know where to go, what to ask for and what they will receive, and this makes the world seem smaller and safer.
Interestingly enough, franchising began over 100 years ago, during the 1850s, when Isaac Singer needed to sell his sewing machine in as many units as possible. For this, he needed entrepreneurs and salesmen that knew the product and knew how to sell it; he coordinated and organized trainings, educating his future salesmen on how to present his sewing machine. For most people, the franchise definition is being your own boss and making your own money; indeed, with franchises, hundreds of thousands of people are able to get into business for themselves.
There is no point in trying to open up a new fast food shop because competition will be too great, so the best solution is to purchase a franchise. There are many advantages for both franchisee and franchisor; the first gets a successful business model and knows little advertisement will be needed in order to bring in customers, and the franchisor also provides training to make sure the recipe is the same everywhere; the latter doesnt have to deal with all the details of expanding the business because people come and simply ask for it, and the franchisor just makes sure the same standards are kept with every new unit.
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