When you hear the term “franchise”, the most familiar example is fast food-such as Wendy’s, McDonald’s, or Burger King. Fast food and restaurants are not the only examples of franchises, though their success is probably what brings them first to mind. Just about every industry you can think of includes a successful business practice sold as a franchise-from janitorial services to tires to haircuts. There are as many different franchise business systems as there or goods or services that people wish to use.
WHAT IS A FRANCHISE?
A franchise is the agreement or license between two legally independent parties which gives:
A person or group of people (franchisee) the right to market a product or service using the trademark or trade name of another business (Franchisor)
The franchisee the right to marker a product or service using the operating methods of the franchisor
The franchisee the obligation to pay the franchisor fees for these rights
The franchisor the obligation to provide rights and support to franchisees
Product distribution franchises simply sell the franchisor’s products and are supplier-dealer relationships. In product distribution franchising, the franchisor licenses its trademark and logo to the franchisees but typically does not provide them with an entire system for running their business. The industries where you most often find this type of franchising are soft drink distributors, automobile dealers and gas stations. Some familiar product distribution franchises include:
Although product distribution franchising represents the largest percentage of total retail sales, most franchises available today are business format opportunities.
Business format franchises, on the other hand, not only use a franchisor’s product, service and trademark, but also the complete method to conduct the business itself, such as the marketing plan and operations manuals. Business format franchises are the most common type of franchise.
USA Today reported that the 10 most popular franchising opportunities are in these industries: