What’s a Franchise? Breaking Down the Basics From Step 1
You’ve heard the word franchise. You know they can be a great business venture. You might have even considered branching out into one on your own. But do you really understand what it means? Everything that goes into a franchise – the entire meaning of the idea behind it?
It might sound like common knowledge, especially for those who have considered it for themselves, but folks have jumped into a business venture with less information. Oftentimes as soon as they hear about something that’s profitable, they’ll sign on … with minimal research. Having all the information up front, however, will offer a much bigger chance at success.
What’s a Franchise?
A franchise is the permission to use a specific brand. By signing up with a company, an individual gains the rights to use a certain brand or product. Generally in the food industry this comes as an alternate location or branch of an existing company. For instance, names that are known throughout the entire United States, or even just a portion of it.
The term “franchise” is most often used to refer to brands that host multiple locations, rather than just the licensing itself.
Why Companies Franchise
After starting with a single branch (and seeing success), companies can create the option for others to open their own locations. This allows the original branch to grow in exposure – with alternate buildings and a wider reach. But it also allows them to bring in more money by charging royalty fees, which allows franchisees (those who buy said rights) legal access to brands, logos, foods, and more.
Who Owns Each Location?
The franchisee, or the corporate office – whoever opened it. Those who opt to open their own location purchase their own building, hire their own workers, etc. (Sometimes corporate starts franchise locations and sells them off once they’re operational.) Aside from branding rights (or whatever other assistance corporate offers/the franchisee chooses to receive), the business is entirely self-sustained and locally ran.
Why Folks Buy In
Franchising offers a way to own one’s own business without starting from scratch. Because brands already have a customer base worked up and are well known, folks want to eat the food and know they’re getting a quality product. This allows local owners to open their doors with existing customers, bring in new eaters who recognize the brand (while traveling or relocating), and to have help along the way. Franchising companies come with marketing packages, restaurant best practices, business plans, and more.
How do They Work?
Each franchise is different. However, most offer options and/or choices for franchisees so they can customize each location and make it work for them and their market. When signing on, a franchisee is given a main contact at corporate with whom they can discuss logistics, contract necessities, and more.
Companies also have their own rules for location placement. For instance, determining how close locations can be in relation to one another and what type of business it will be able to bring in based on population.
Though there’s far more that goes into learning about a franchise, these basics help determine what each has to offer and how folks can gain a living through restaurant ownership.
Check back in for even more commentary on starting your own franchise company or get in touch with questions.