What is a Franchise?
A franchise is a business model in which an individual purchases the rights to operate an established business. The franchisee pays fees to use trademarks, business systems, and gets support. Franchises can range from small operations to large corporations.
Key Differences Between Small Business and Franchise
The key differences between a small business and a franchise relate to sourcing products and negotiating contracts. With a small business, you source products and negotiate contracts yourself. With a franchise, you access established suppliers and contracts are handled by the franchisor.
Types of Franchises
The three types of franchises are: the business format franchise, product distribution franchise, and management franchise. Each franchise operates differently.
A franchise is a type of license that grants a franchisee access to a franchisor’s proprietary business knowledge, processes, and trademarks, thus allowing the franchisee to sell a product or service under the franchisor’s business name.
Franchise Classifications
A franchise is a business model in which an individual purchases the rights to operate an established business. The franchise business model itself is an attractive proposition for franchisees, allowing them to leverage the brand equity of a franchisor in a highly competitive market.
A common franchise model is product franchising where the franchisee purchases and resells goods. Franchisees may also sell certain products but operate independently.
Before considering a franchise, understand how it differs from other models. Franchising can provide training, lower risk, and shared branding. But fees and royalties must be paid.