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Sun, Sep 27 2020 04:59:16 AM  |  /

What Is A Franchise?

You see them every day. You might not always realise it, but they're there. In fact, they're everywh

You see them every day. You might not always realise it, but they're there. In fact, they're everywhere.

From the coffee shop that makes your macchiato in the morning, to the firm that cleans the offices as you leave work at night.

Chances are, they're both a franchise.

Then there are the people putting up 'For Sale' signs for estate agents, and many more letting properties down your street.

Quite a few of those will be franchisees.

They're the wizards that magically repair stone chips and dents on our cars. They care for the elderly, they teach our babies to swim and they'll even take your dog for a walk.

These people and their businesses are woven into the fabric of our society.

But, what is a franchise?

Put simply, it's the licencing of a brand name or a business system that can be successfully replicated in another area.

And what is a franchise to you, the consumer?

It might be a product or it might be a service. It might be the reassuring familiarity of a well-known brand. And, as you're now beginning to see, it's any number of businesses that you interact with everyday.

Why we all need franchises and franchisees

A franchise can provide you with your lunchtime fast food fix, while franchisees will deliver organic vegetables to your door when you want to cook for yourself.

There are franchisees who will clean your oven, your windows or your chimney. And there are others who will cut your lawn, your hair or your tax bill.

And talking of tax, the treasury is a big fan of franchises too.

Last year the franchise industry contributed £13.4 billion to the nation's economy. There are more than 40,000 franchises in the UK employing some 600,000 workers. Franchising is big business, and HMRC gets its share.

So, what is a franchise? It's a commercial entity that brings benefits to us all. And once you begin to recognise the names and logos, you'll easily identify franchised brands on every high street, and spot franchisees driving their vans up and down the roads of this country.

Who are these 40,000+ franchisees?

Well, they're the licence holders. They're local business owners granted the rights to bring a particular product, or service, to you in your area.

Products that you take for granted such as food and beverages. Services that we all need like cleaning and care.

Admittedly, until now you probably haven't been aware of that many of them.

And this may be the first time you've asked the question; what is a franchise?

But now you know; for almost any domestic or commercial product and service you can think of, there's probably a franchise for that.

What is a franchise opportunity?

So we've covered the consumer perspective; the daily contact we all have with franchises.

But what is a franchise as an investment opportunity?

It's not going to be a film franchise like James Bond. Nor will it be a rail franchise. And, unless you're an Oligarch or an oil baron, it's unlikely to be a sports franchise either.

Because, while the same principles of franchising apply to all of those – they own the licence or brand, or are granted the rights to provide a service by a higher body in the form of a government or company – very few of us could afford to invest in them!

If you're reading this as a budding franchisee, then you'll want to find out about franchises that are available to you. Those franchises that you can operate and that will provide you with an income.

In effect, what is a franchise that you can own?

That will depend to a degree on your skills and your expertise, but more importantly, your character traits.

If you're shy and retiring you could look at an internet business you can run from home, or perhaps a van-based franchise. Whereas you ought to steer clear of consumer-facing franchises, or management operations in which you're required to lead and inspire, as well as hire and fire.

On the other hand, if you're confident and gregarious you might be better suited to coaching or teaching, or one of the many sales-driven franchises. Think carefully about what your day would entail though, as you would probably find yourself bored spending all of it driving a van.

And what is a franchise going to bring to you and your family if you do decide to buy one?

Like any business, it's not the easy option. You'll need reserves of energy and resilience that you didn't know you had.

But you will be working locally. You will be in charge of your diary. And choose the right franchise for you – one that you'll enjoy and relish getting out of bed for – and you'll see a direct correlation between your efforts and your returns. Returns that will provide a better life for you and your family.

Of course, as with any investment, the final decision will depend on the cash you have at your disposal. But if you want a franchise you could realistically own or operate, it will be what's referred to as a Business Format Franchise.

What is a Business Format Franchise?

The franchises mentioned earlier in this article – the household names in which you eat and drink, the S.M.A.R.T. repair firms, the lettings agents and the oven cleaners – are all Business Format Franchises.

Here's how it all works.

A company – the franchisor – develops a business system. It makes a few mistakes, it learns from them. It attracts customers and it makes money. It might make a few more mistakes, but it fine-tunes a business model that works.

What is a franchise? It is a proven business format.

The franchisor then allows you – the franchisee – to operate its system for a fixed fee or for a percentage of your revenue. You avoid the mistakes the franchisor made in their early days. You attract customers, you make money and the franchisor makes money.

Business format franchising, then, has benefits to both parties:

·         The franchisor grows his or her business faster, using other people's money and efforts (the franchisees) to do so.

·         The franchisee grows his or her business faster and mitigates their risk by using the parent company's proven systems.

Does it sound like a franchise could be right business model for you? My-Business.com features franchise opportunities for every level of investor. Click here to visit our franchise for sale section right now.