WHAT IS A FRANCHISE?

WHAT IS A FRANCHISE?: Franchising is a process of distributing products or services that involves a franchisor, who establishes the brand’s trademark or trade name and a complete business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under its name and system. Technically, the contract binding the two parties is called a “franchise,” but this term usually refers to the actual business that the franchisee operates. The practice of creating and distributing brands and franchise systems is often thought of as franchising.

There are two different types of franchising relationships. Business format franchising is the most commonly known type. In business format franchising, the franchisor provides the franchisee not only its trade name, products, and services, but also a complete system for operating the business. The franchisee usually receives assistance from the franchisor in the form of site selection and development assistance, operations manuals, training, brand standards, quality control, a marketing strategy, and business consultants. Although less recognized than franchising, traditional or product distribution franchising is much larger in total sales than business format franchising. Examples of traditional or product distribution franchising can be found in the bottling, gasoline, automotive, and other manufacturing industries.

Franchising Is About Relationships

Many people, when thinking about franchising, first think about the law. While the law is certainly very important, it is not the focus of your attention when understanding and learning about franchising. At its core, franchising is about the brand value of the franchisor, how the franchisor supports its franchisees, how the franchisee fulfills its obligations to deliver products and services in accordance with the system’s brand standards and most importantly – franchising is about the relationship the franchisor maintains with its franchisees.

Franchising Is About Relationships

Many people, when thinking about franchising, first think about the law. While the law is certainly very important, it is not the only thing to focus on when understanding and learning about franchising. At its core, franchising is about the brand value of the franchisor, how the franchisor supports its franchisees, how franchisees can fulfill their obligations to deliver products and services according to the system’s brand standards, and most importantly – franchising is about the relationship the franchisor maintains with its franchisees.

Franchising Is About Brands

The franchisor’s brand is its most valuable asset and consumers decide which business to buy from and when to visit a business based on how much they know about the brand, or what they think it is. To a certain extent consumers don’t really care who owns the business and what it does, as long as their brand expectations are met. WHAT IS A FRANCHISE? If you become a franchisee, you can certainly develop a relationship with your customers to maintain their loyalty, and of course customers will absolutely love to buy from you because of the quality of your services and the personal relationship you establish with them. But first and foremost, they have to trust the brand to meet their expectations, and the franchisor and other franchisees in the system trust you to meet those expectations.

Franchising Is About Systems and Support

The best franchisors provide the systems, tools and support so that their franchisees have the full ability to live up to the system’s brand standards and ensure customer satisfaction. And, the franchisor and all other franchisees expect you to independently manage the day-to-day operations of your businesses so that you can further build the company’s reputation in your market area. WHAT IS A FRANCHISE?

When choosing a franchise system to invest in, you can evaluate what kind of support you will be provided and how well the franchisor is managing the development of products and services to keep up with changing consumer expectations. Some of the more common services provided by a franchisor to franchisees may be:

A recognized brand name,
Site selection and site development assistance,
Training for you and your management team,
Research and development of new products and services,
Headquarters and field support,
Initial and continuing marketing and advertising

Franchising Is also a Contractual Relationship

The franchisor licenses a franchisee the right to use its trade or service mark;
To identify the franchisee’s business in marketing a product or service using the franchisor’s operating methods;
The franchisor provides the franchisee with support and exercises certain controls; and,
The franchisee pays the franchisor a fee.