What is a Franchise? What is Franchising? Learn How 6 Leading Websites Define These Basic Terms

What is a Franchise?

About.com:  “A franchise is a right granted to an individual or group to market a company’s goods or services within a certain territory or location.  An individual who purchases and runs a franchise is called a franchisee. The franchisee purchases a franchise from the franchisor. The franchisee must follow certain rules and guidelines already established by the franchisor, and in most cases the franchisee must pay an ongoing franchise royalty fee, as well as an up-front, one-time franchise fee to the franchisor.”

“Franchising allows entrepreneurs to be in business for themselves, but not by themselves. There is usually a much higher likelihood of success when an individual opens a franchise as opposed to a mom and pop business, since a proven business formula is in place. The products, services, and business operations have already been established.”

“There are many advantages to buying a franchise. Some of these advantages are:

• Corporate image – The corporate image and brand awareness of the company is already established. Consumers are always more comfortable purchasing items from a familiar name or company they trust.

•  Training – The franchisor usually provides extensive training and support to the franchise owner.

•  Savings in time – Since the franchise company already has the business model in place, you can focus on running a successful business.”

What is Franchising?

Wikipedia:  “Franchising is the practice of using another firm’s successful business model. For the franchisor, the franchise is an alternative to building chain stores to distribute goods and avoid investment and liability over a chain. The franchisor’s success is the success of the franchisees. The franchisee is said to have a greater incentive than a direct employee because he or she has a direct stake in the business.”

What is a Franchise?

Business Opportunities Weblog: “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.”

What is Franchising?

Franchise.com:  “Franchising is a way of doing business. It is a method and marketing tool for companies to expand their market share more rapidly and less expensively.  Franchisors offer to their franchisees the license or right to sell its goods or services and/or use its business techniques. The franchisees usually pay an initial fee to acquire this right, and thereafter pay a percentage of their gross sales to the franchisor throughout the term of their franchise contract.”

“In return for these payments, franchisees gain priveleges, including the right to sell a proven and recognized product or service, to use the franchisor’s business practices, and to receive initial training and ongoing support.  By following the franchisor’s business practices and offering products that meet the company’s standards, franchisees can consistently provide customers with quality goods and services.  Research has shown that the success rate of new franchisees is much higher than that for other new business start-ups.”

What is a Franchise Business?

FreeAdvice.com:  “A franchise business is a business in which the owners, or franchisors, sell the rights to their business logo and model to third parties, called franchisees.  To invest in a franchise, the franchisee must first pay an initial fee for the rights to the business, training, and the equipment required by that particular franchise. Thereafter, the franchisee will generally pay the franchise business owner an ongoing royalty payment, either on a monthly or quarterly basis. This payment is usually calculated as a percentage of the franchise operation’s gross sales.”

“After the contract has been signed, the franchisee will open a replica of the franchise business, under the direction of the franchisor. The franchisee will not have as much control over the franchise business as he or she would over their own business, but may benefit from investing in an already-established brand.”

“Generally the franchisor will require that the business model stay the same. The franchisee should remember that she is not just buying the right to sell the franchisor’s product, but is buying the right to use the successful and tested business process. The franchisee will also usually have to use the same or similar pricing, in order to keep the advertising streamlined. Aside from using the business model determined by the franchisor, the franchisee will otherwise remain an independent owner of the franchise.”

What is Franchising?

Franchising.com: “Franchising is one of three business strategies a company may use in capturing market share. The others are company owned units or a combination of company owned and franchised units. Franchising is a business strategy for getting and keeping customers. It is a marketing system for creating an image in the minds of current and future customers about how the company’s products and services can help them. It is a method for distributing products and services that satisfy customer needs.”

“Franchising is a network of interdependent business relationships that allows a number of people to share a brand identification, successful method of doing business, and a proven marketing and distribution system. In short, franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, i.e., to get and keep more customers than their competitors.”