All About Franchising

What is a Franchise?

Everyone heard about the term “franchise” and has a sense of what does it means. Franchising is a process in which product or services are distributed by a franchisor, who establish the brand’s name or set up a business system, a franchisee who wants to work under that brand name have to pay initial fees and get the right to do business under franchisor’s name or system. If we see, technically franchise is a legal contract that binds two parties one is the owner of the brand name while on the other hand, the second one is the person who buys the name and starts his business. The process of selling the brand’s name and franchise system is commonly referred to as Franchising. There are two parties involved in this process. One is the franchisor and the second one is the franchisee.

The franchisor: Franchisor is a person who owns a brand name or business, including property products, services especially logo, color, name, etc.

Franchisee: Franchisee is a person who gains the right to use another person’s brand name after paying a certain amount.

How does the Franchise system work?

If a businessman wants to increase its market share or wants to grow its business all over the world at a low cost, he can franchise its brand’s name or product. In today’s world, franchises are a prevalent method for those people who wants to expand their business in a highly competitive industry. For instance, the fast-food industry. One of the most useful advantages of buying a franchise name is that you don’t need to spend time on establishing your brand name. Just pay and start your work rapidly.

Short History of Franchise

As we know, the United States is the world-leading country and also a world leader in a franchise business with a vast, storied history. The concept of the franchise was started back in the mid-19th century. For example, the most common example is Isaac Singer, the person who invented the sewing machine and began franchising his trademarked sewing machine on a large scale. Another great example is America’s fast-food industry Howard Johnson Restaurant back in the 1930s  running its chain all over the world. Now, today the United States has the highest percentage in Franchising. During the last survey, the top 15 businesses include Dunkin’ Donuts, McDonald’s, Dairy Queen, Denny’s, etc. Much other Franchising consists of the chain of the hotel such as Hampton by Hilton and Day’s Inn.

Types of Franchises

There are many types of franchises that differentiate based on size, geographic location, etc.

Here are the few types of franchises:

  • Business format franchise
  • Product franchise
  • Manufacturing franchise

Business format franchise

Business format franchise, All About Franchising

Business format franchises are the most common type of franchise. In this type, a company wants to expand by supplying business owners, including its name and trademark. A franchisee buys the title and starts running its business. In return, the franchisee pays a specific fee to the owner. In most cases, the franchisee just buys and supplies the food at their brand. One of the best examples of business format franchises is a fast-food restaurant. The most famous fast food industry is McDonald’s, Burger King, and Pizza Hut as well.

Product franchise

In a product franchise, manufacturers control how stores distribute their products. In this kind of agreement retailers just provide their products and use their name and trademark. For this purpose, the owner has to pay fees and can buy minimum products. For instance, tire companies are the best product franchise.

Manufacturing franchise

Using a manufacturing franchise, a franchiser has the full right to produce and sell his brand using anyone’s name and trademark. This type of franchise is mostly used among food and beverage companies. The best example of a manufacturing franchise is soft drink companies to produce bottles, and can also distribute oft drinks. Highly-paid companies can sell their juices all over the world using other’s brand names or trademarks. For example, in the case of coca-cola, they only sell the syrup, the other companies just mix water and another ingredient according to them.

Having a good relationship with Franchising

When anyone thinks of buying a brand name, the first thing that comes to mind is that about the law. Yes, the law is essential, but the brand name is most important than that. Franchising is all about the franchisor’s brand value, how does franchiser support its franchisee, how does franchisee does his duty, and delivers products and services to maintain the brand’s standards and the most important is the relationship between the franchiser and his franchisees.

Franchising is maintaining the brand’s name.

The brand’s name is the most critical task in the franchising system. When you own a brand name, you don’t care about who is running the business as long as when you met the expectation of the brand. If you are a franchisee, then you have to develop trust with your customer and show some loyalty towards them. The franchiser and the franchisee both try to make their brand’s name on the top of the list. That’s why Franchising is all about maintaining the brand’s name.

Good System and Support of Franchising

Every franchisee must have a good system and support to raise the standard of their brand. Franchiser must need to make day-to-day operations of their business to enhance the reputation of their brand in the market area.  Following are the few standard services provide by franchisee

  • Well-known brand name
  • Give training to your team before starting your work
  • If you are starting a new product or service then first do some research on it as well
  • Make headquarter of your company
  • Using advertising strategies

Starting New Franchise

Here we will see the necessary steps to start a franchise:

  • Make a business plan
  • Registered your brand name in papers
  • Prepare legal documents about your brand’s name
  • Develop an eye-catching look and presentation
  • Make your advertising strategy
  • Organize a training program for your workers
  • Develop a team
  • Promote your franchise
  • Help franchisee in selection

Make a business plan

Before starting your work, you will have to make a plan to organize all your work. You should review what you are going to do. Have a review of your current product. You must know about the outside market rate regarding your product. Make a vision that in the coming year, where will your company stand.

Registered your brand name in papers

You will have to register yourself in the legal documents to secure yourself in the coming years in there is any query

Prepare legal documents about your brand’s name

After purchasing a franchise first thing you have to do is prepare legal papers of your brand o that no one can arrest you in the future if something happens.

Develop an eye-catching look and presentation

Your brand’s logo is the virtual appearance which is faced by the world. So, it must be solidified and uniform. Always use good quality products.

Make your advertising strategy.

It will include both regional and local franchises. You have two options. Whether you can plan your strategy based on your experience or you can hire an agency for this purpose. If you have experience and hire an agency, you can do work more appropriately.

Organize a training program for your workers

The owner must arrange a comprehensive training program for their workers so that they have somehow know what they are doing to start. In this way, your workers become more active and take part in all kinds of activities.

Develop a team

You must develop a team for your work. The main job of your team is they will spend one or two weeks on the road opening each new store, providing experience, and convince others to buy your products.

Promote your franchise

Make a plan to promote your franchise and try to find opportunities to promote your brand. This strategy is as simple as advertising any magazine or show some marketing skills.

Help franchisee in selection

Finding a location is very important for many people in the business. Take help from a franchisee to get the right place.

Prose and Cons of Franchising

Pros

The high strength of Franchising is the ability to bring independent retailers together by using a single trademark. The benefits of this affiliation are many: brand awareness, uniformity in meeting customer expectations, the power of pooled advertising, and the efficiencies of group purchasing.

For the individual owner, there are many advantages to Franchising. The ever-present risk of business failure is reduced when the business program has already proved to be successful in the marketplace; the use of an established trademark saves the business owner the cost of creating and advertising a name that customers will recognize, and the advantages of group advertising and purchasing make operations more profitable. Also, with Franchising, expansion seems to come more naturally. The successful franchise may quickly lead to building a second and then a third business, and so on. Fortunes have been made this way.

Cons

Franchising is not for everyone. If things have to be done your way, you may want to head in another direction.

Some franchise systems are better than others. A weak franchise program will not train you well to handle the challenges of the business, will not do an excellent job of assisting you when problems arise, and will not make the best use of your advertising dollars.