What is a Franchise Business?

What is a Franchise Business?

Are you a visionary entrepreneur who wants to be your own boss, but you're not willing to take on the risk of starting your own business from scratch? Franchising can be a great alternative if you want the support of a franchise company in the start-up phase of your business. The term frequently used is "buying a business in a box."

A franchise is a successful business concept in which individual entrepreneurs purchase the rights to open and run a location of a larger company. The franchising company (franchisor) signs a contractual agreement with the individual entrepreneur (franchisee) explaining in detail the company's rules for operating the franchise. By law, franchise sellers must disclose certain information about their business to potential buyers. In the United States, franchises are typically organized under state laws, although the Federal Trade Commission requires that franchisors provide a Full Disclosure Document (FDD) of franchise contracts in advance. This allows a franchisee the opportunity to make a good business decision.

The franchisor and franchisee have an ongoing relationship, and the franchisor often provides a full range of services, including site selection, training, product supply, marketing plans and even assistance in obtaining financing.

The benefits of owning a franchise include a well-recognized company name and image, along with training from the franchisor in operating the franchise successfully. Failure rates among franchises are lower than among other new businesses, largely because customers generally recognize the company name and know what to expect from the location. The training is extended to ongoing support from the franchisor to assist with the franchisee's success in the business model.

The perceived disadvantages are the fees associated with owning a franchise business. There is an initial franchise fee, which covers the acquisition of rights to open a location using the franchise model, logo, and design. Initial training is also a part of the franchise fee. The royalty fee is a periodic charge that the franchisee pays to remain part of the franchise system, which continues to provide branding, advertising, and administrative support.

The franchise business world is an amazing and profitable part of commerce. There are more than 150 franchise categories and thousands of different franchise brands. Because of the many options, it can be a very confusing when you begin to research a business option. Utilizing the knowledge and experience of a Franchise Consultant helps you through the steps to buying a franchise and there is no charge to use their services.

So if you are considering buying a business or starting a business, always consider a franchise business as a great option! 


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