What is a franchise and how does franchising workWhat is franchising?

Have you ever considered opening a franchise? Franchising is a method of distributing products or services. It’s kind of like opening up a small business, but it tends to be less risky because someone else owns the brand – think McDonald’s, Starbucks, or Marriott hotels.

But how does that work? 

According to the International Franchise Association, “There are usually at least two levels of people are involved in a franchise system:

(1) the franchisor, who establishes the brand’s trademark or trade name and a business system; and

(2) the franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor’s name and system. Technically, the contract binding the two parties is the ‘franchise,’ but that term is often used to mean the actual business that the franchisee operates.”

So what do you need to get started?

  1. First, pick an industry that interests you. What kind of products or services would you like to provide? Research the existing franchises in your area, and select a couple that you like for further research.
  2. Next, familiarize yourself a bit with franchise laws. These are comprised of both federal and state laws, and they pertain to things like franchisor disclosure requirements; franchisor and franchisee relationships; and industry-specific laws, so there can be a lot of variances. As you research more about a particular franchise’s operation, you’ll have a better idea of what exactly is required of you. In general, you should expect a look credit history, history of any previously owned businesses, and any experience you have in the industry or general management.
  3. Think about the investments required: scouting locations, time commitments, capital, training, etc. There will be numerous hurdles, but having an open conversation and establishing a good relationship with your franchisor is essential. So many opportunities could be waiting for you; you just need to listen for the knocks.

Note: As any franchisee will tell you, there is no short cut to business success. There may be more certainty in running a franchise than there is starting your own, original business idea. But it’s not a guarantee and even franchises require a lot of hard work if they are to succeed.

Best of luck to you and be well

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