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What is a Franchise?
A reader wrote:
What exactly is a franchise?
In its most simple definition, a franchise is a business opportunity that allows the franchisee (possibly you) to start your business by legally using someone else’s (the franchisor’s) expertise, ideas, and processes. In some cases, this means also having the right to use the franchisor’s established name and branding, as well as their already-tested business model. In other cases, this means the right to resell (or distribute) a franchisor’s product.
More completely, a franchise is the right to use someone else’s business system. As a franchisee, you purchase this right by means of a franchise fee and in accordance with a contract, called a franchise agreement. In return, the franchisor maintains the business process and you agree to operate your business according to their model.
When you hear the term “franchise”, the most familiar example is fast food-such as Wendy’s, McDonald’s, or Burger King. The important thing to note is that these Franchisors are not just selling burgers; they’re selling a consistent way to run a business that sells burgers. This includes marketing, advertising, recipes, the look and feel of the facility from which you, too, would sell burgers, and the very well-known branding that goes with that system.
Fast food and restaurants are not the only examples of franchises, though their success is probably what brings them first to mind. Just about every industry you can think of includes a successful business practice sold as a franchise-from janitorial services to tires to haircuts. There are as many different franchise business systems as there are goods or services that people wish to use.
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CHRIS BYLHOUWER on February 26th, 2010 1:15 am
If deciding if an opportunity is a franchise or not, the simplest test is:- “Are there any elements of compulsary control” the courts will use this test in most cases regardless what the lawyers say. It doesn’t matter what the person selling calls it. Many opportunites are in fact a Franchise!
Don on February 27th, 2010 6:06 am
The right to use someone else’s business system is the key. It is a system that works. You are not developing your own process or procedures. You have to implement them. Upfront capital and the willingness to work are two things that are needed to make you successful.
CHRIS BYLHOUWER on January 30th, 2012 3:02 am
Confirming what is a Franchise? Stating “Reproduce this business model confidently eliminating guesswork and grow!” Then saying it is not a Franchise is a contradiction. The only real answer if a system is a Franchise or not, lies in the structure not the advertising!
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