What is a Franchise?
You have heard about franchise but do not know how it works. A franchise is based on a business concept which can be adopted by an organisation as a strategy for rapid growth. This will allow the company to increase its market share at a very low cost. You are looking to start a new business, but you are new to different industries. A franchise allows you as an entrepreneur or business owner to expand the businesses in the selected industry. Each franchise requires a franchise fee and some initial investment capital you’ll need to pay in prior the agreement. A franchise fee is a cost a potential franchisee pays up front to operate the franchise. And the initial investment amount includes expenses such as royalty fees, real estate, and inventory costs.
A franchisor licenses its systems, business processes, intellectual property, brand, logo and rights to sell its branded products and services to a franchisee.
When did the concept of Franchising originate?
History of franchising started as a concept in ancient times. Feudal lords launched the method of offering to others the rights to accumulate tax obligations and also run markets on their part. However, this makes franchising more akin to a political ruling role instead of that by a corporate organisation.
One of the earliest example of using franchising via the sale of consumer goods to housewives in America, 1851. Isaac Singer created the very first American product Singer® franchisor. He marketed to independent salespersons the rights to sell his sewing devices to end-users.
During the mid-nineteenth-century, beer brewers also establish agreements with pub proprietors to offer their beer solely in the pubs in Germany.
Pros of Franchising your business
Franchising brings many benefits to business owners who are looking to grow their business
- Reduced Capital Requirement
- Keeping a lean Staff count
- Ease of Scalability
- Increase Profits
- Brand Awareness result from growth
Cons of Franchising your business
- High initial start-up cost that includes trademark and branding
- Lesser control over the franchisee
- Smaller revenue from each franchisee
Some of the popular franchise in different industries
Let us take a look at some of the franchises in different industries.
Food and Beverage Industry Franchise
Education Industry Franchise
- Kumon Method Learning
- Sylvan Learning Center