08 Sep, 2017
What Is A Franchise
"What is a franchise?" many people ask. A franchise refers to permit offered to a company or individuals to trade in products or services within specified boundary limits. Many people attribute franchising with the fast food industry since some of the leading franchises are from that industry but the fact is that you can find franchises in all business fields you can think about. You can find more than 120 types of franchises in the industry such as cleaning & maintenance, automotive, financial services, pet-related franchises and health and fitness among others.
How franchising function
There are several terms and conditions that have to be followed by the franchisee (entrepreneur) failure to which the warrant to operate the business is withdrawn. Franchisers normally require franchisees to be worth some specified amount. An initial and one time investment money called franchise fee is given to the investor. Other organizations do require continuous payments of royalty fees. Both the franchising and royalty fees are unique in different organizations. Investors seeking to get in a franchise agreement should determine the investment amount and additional payments such as advertising costs, training expenditure, etc.
After the franchisee pays the required amount, franchisers give them the blueprint of their business and the operational details. Every business is allocated its operational territory which is exclusively protected from completion of the same business. This implies that you can only find only a single store in a particular area to avoid competition from similar brand.
In addition to being given the business plan, investors are offered the brand products, logo, initial training and other necessary things from the franchising company such that the business picks up immediately.
History of franchises
The franchising history dates back to 1850s. It was started by Isaac Singer who invented the sewing machine. Singer found that he required o reach customers that were out of his geographical region as well as train them in the industry. He started selling licenses to entrepreneurs in other parts of the country to sell the machines. In 1955, an investor by the name Ray Kroc took over a small fast food chain and converted it to McDonald’s which is among the most popular franchise in the world.
Franchises are popular since they offer higher chances of success. The proven business formula, training and guidance that are provided by the franchiser makes getting the business established fast simpler. The corporate image also helps in bring customers to the business easily. Entrepreneurs can also concentrate in other business management issues as the franchisee provides the business plan and promotes the franchise.
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