Franchise Definition - the absolute basics of the madness!

Posted by Janon Otto on Mon, Nov 7, 2011 @ 18:11 PM

You are doing what!?  That is the question we heard most when we told our friends and family that we were franchising Shear Madness Haircuts for Kids.  What is franchising?  Are you MAD?  It was obvious that though there are franchises every where we do business, that most people have no idea what a franchise is.

A franchise is a business model.  When a business owner decides to expand his business he has options.  One of those options is to franchise.  Franchising allows others to own their own company yet use the name, logo, and systems of the franchise business owner (the franchisor).

A franchisee uses his own funds, has the full responsibility of the success or failure of his own company yet has the following advantages:

  1. He doesn't not have to come up with his own YOU-nique business idea.

  2. He can use the systems that have already been developed and used successfully by another shortening the learning curve.

  3. He gets "Super Natural Support" & training with a business partner who knows and cares about the success of his new business.

  4. If the franchise system is progressive, he does not have to worry about "the Ongoing Labwork" needed to develop the concept further and keeping up with trends as the franchisor will worry about that for him.

  5. National advertising is done for him.

  6. As the system grows the name brand recognition grows without the franchisee having to open more locations himself.

  7. When a franchisee is ready to sell his business he has a partner in this process and a recognizable asset to sell.

What does the franchisor get?

  1. The franchisee pays the franchisor an initial franchise fee for the training, systems, logos, etc. of the franchised business.

  2. The franchisee pays an ongoing royalty - which is usually a percentage of sales for the continuing developments of the franchise and ongoing support of the franchisor.

  3. Many times the franchisee contributes to a National Advertising Fund a percentage of sales for advertising that benefits all businesses within the franchise system, saving

Why would a Business choose franchising as a way to grow?

  1. Many times a business can grow faster using the franchise method instead of the company owned store model.

  2. The franchisor does not have the added responsibility of additional payroll as they do not pay the franchisee as they would an employee.

  3. Training may be the forte of the franchisor and they enjoy watching others succeed using their concept.

  4. A franchisor does not use his own capital to grow the brand.


Topics: franchise, what is a franchise, franchise definition