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Getting Started - What is a Franchise

Most of you are probably already familiar with franchises. You may even patronize a variety of franchised businesses without realising that they are franchises. These businesses range from car servicing and financial services to yogurt and home repairs. According to the International Franchise Association(IFA) franchises employed nearly 9,000,000 Americans in 2015 and generated nearly $880 billion. Franchising is difficult to escape.

The technical definition falls fairly in line with what we all typically think a franchise is - “an authorization granted by a company to an individual or group enabling them to carry out specified commercial activities”. Basically they are businesses operated by an individual or a group (the franchisee(s)) that shares a common product and/or trade name to the parent company (the franchisor).

But, what you might not know is that there are actually two major types of franchises: product/ trade name franchises and business format franchises. In product and trade name franchises the franchisee (operator of the individual business) has use of a product or trade name, but no supporting relationship with the franchisor (larger company). This means that the franchisee basically operates the business independently, but does benefit from the marketing and advertising efforts of the franchise system. You’ll typically see these types of franchises for products that are older and established with a proven customer base. Some of the most common if these businesses are auto dealerships, gas stations, and soft drink bottling companies. On the other hand business format franchises is a setup that is characterized by an on- going business relationship between franchisor and franchisee. The franchisee is not only offered a trademark and a logo, but also a complete system of doing business. This is the more well known and much faster growing form of franchising, with world famous companies like McDonald’s, Holiday Inn, Century 21, and Baskin-Robbins using this format. This is also the form of franchises that we’ll primarily talk about on FranchiseHelp.

In the best of all worlds, the business format franchise is mutually beneficial for franchisor and franchisee alike. The franchisee typically pays an initial fee and ongoing royalties, giving the franchise system a continuous supply of working capital to develop and expand the organization. In turn, the franchisee gets a business package which would take years to develop and refine, a strengthened ability, to compete through the established brand identity and marketing power of the system, and the cost benefits and clout associated with the franchisor’s collective purchasing power.

2015 Top 5 Restaurant Franchises

Without a doubt, the industry most tied to franchising in Americans' minds is food. Some of the most popular restaurants out there, including McDonalds, Subway, Chik-Fil-A, and many more, can credit theirmeteoric growth to the skill of theirfranchisees.

Choosing Between a Franchise and Starting a Business

Owning your own business has always been a linchpin of the American Dream. With the advent of franchising, prospective owners now face a choice between running an independent business and operating their business unit as part of a franchise system. Put differently, they can launch a brand new restaurant churning out specialty cakes and ice cream sundaes, or open a Cold Stone Creamery location. Determining the right option for you comes with some complexities, but there are a couple of primary factors to consider: Your risk tolerance and your personality type.

20 Franchises All Female Entrepreneurs Should Know

Female business owners account for roughly a quarter of total franchise unit ownership today, according to data from Pricewaterhouse Coopers and the International Franchise Association. As the number of women investing in franchised businesses grows, franchisors are taking notice and increasingly directing their recruitment efforts towards the female demographic.