- Fantastic Team
- 6min read
- Published: August 12, 2020
- Views: 174
What is a Franchise Business? How Does a Franchise work?
You might dream about starting your own business. Many people do. But most are worried about the cost and risks of going into business for themselves.
That’s why the franchise business model has started to gain so much ground in recent years.
Because the world seems intent on throwing constant recessions, COVID lockdowns and other difficulties in the path of modern business owners.
But a franchise is a way to open your own business and get the support you need while you do.
If you’ve been wondering what a franchise is and how it works, here’s everything you need to know:
What is a franchise business?
A franchise is a business agreement between two parties:
- The franchisor: has a successful business, usually with a well-known name, proven processes and a large customer base.
- The franchisee: pays a franchise fee to gain the right to trade under the name of the franchisor, taking advantage of their existing brand, highly effective processes and established clientele.
Are there different types of franchise?
“What’s a franchise?” might seem like a simple question. But it’s important to know that there are three major different types of franchise agreement:
1) Business format franchise
By far and away the most popular type of franchise, under this type of agreement a franchisee is able to trade under the brand of their franchisor (sometimes called the parent brand).
The franchisee can use a wide array of their franchisor’s assets, including the well-established branding and their overall business model. The franchisee will also usually receive additional support and training in how to grow and run their business.
2) Product distribution franchise
A franchise like this operates more like how a supplier and retailer work together. The franchisee is also allowed to use the franchisor’s branding in order to sell the franchisor’s products. But other operations are largely left up to the franchisee with no support or training provided.
3) Manufacturing franchise
Similar to the above, but instead of using the franchisor’s brand to sell goods, the franchisee is allowed to use the brand to manufacture them.
Again, this kind of arrangement usually comes without the added support and training which a full business format franchise should come with.
How does a franchise work?
The most important element governing how a franchise works in the UK and most of the world is a document called the franchise agreement.
The franchise agreement lays out all of the details which govern the relationship between the franchisor and franchisee, such as:
- Terms and conditions
- Rights and privileges
- Restrictions and limitations
- Payments and fees
- Usually, details of the set territory which the franchisee will operate in
- Training to be given
- Support to be provided
- Marketing to be undertaken by the franchisor on the franchisee’s behalf
A franchise agreement is also likely to confirm and assert the franchisor’s ownership of their trademarks.
Finally, the agreement will outline the standards which the franchisee will be required to maintain while marketing and selling their goods or services and generally operating their business. This is done to ensure the franchise’s services are always delivered at the highest possible quality – no matter who in the network is delivering them.
How long does a franchise last?
As well as questions about how franchises work, many prospective franchisees want to know how long they tend to last.
Again, it is the franchise agreement which governs this. Common terms can be anywhere from five to twenty years. Most agreements are renewable after the term expires.
Why buy a franchise?
There are many reasons why buying a franchise might be a better choice than starting your own business with no support:
One of the major advantages of the franchise business model is that it can be a business-by-the-numbers approach to success. This means that even someone with minimal training and experience can run a successful franchise if they have enough motivation.
The advantages for franchisees are balanced by the fast growth possible for the franchisor. The result is a mutually beneficial relationship.
Starting your own business as a solo entrepreneur can be incredibly challenging. Mostly because you have no one to rely on when you hit a wall.
As a franchisee, you have the entire support network of your franchisor and other franchisees to call on.
3) Perfected processes
As a new entrepreneur, you also have to learn everything there is to know about operating and growing your business yourself.
There isn’t anyone there to ask the best way to set up a given process. You need to muddle through, iterate and improve and waste money all the time you do.
As a franchisee, those lessons have already been learned for you. You start with processes set up to be just about as efficient as they can possibly be.
4) Brand recognition
Growing your brand is one of the most difficult challenges new solo entrepreneurs face. As a franchisee, you are already part of a brand which is a household name.
As a franchisee, most good franchise networks will conduct large-scale and even national-level marketing on your behalf too. This only helps to further spread awareness of the overall brand, as well as being something no new entrepreneur would be able to afford alone.
5) Existing clients
Branding works because people start to associate certain brands as having values and offering a quality of service which they know they can rely on.
Joining an existing brand means you have a large consumer base already waiting to start using your business. For example, at Fantastic Services, we even actively work to connect you with new and existing clients via our GoFantastic app and other methods.
Is a franchise right for you?
There are a huge number of benefits to buying a franchise. But it’s not for everyone:
- You still need high levels of self-motivation and discipline. Just as you would when starting any new venture.
- The upside of a franchise is that you’re not doing everything alone. Nor are you starting trading from scratch.
If you think a particular franchise opportunity might be the one for you, be sure to request a Franchise Disclosure Document. This gives you all the details about a given franchise system, including your expected earnings.
The FDD should leave you with all the information you need about what a franchise is in general, and the benefits of that opportunity in particular.
Explore Our Franchise OpportunitiesLearn more
Looking for a franchise which is resistant to recessions and lockdowns?
A Fantastic franchise might just be for you. As part of the home services industry, you’ll be well placed to keep doing business no matter what the world throws at you – as many other business owners have already found out.
Contact us now for an obligation-free chat about whether a Fantastic franchise would be a good fit for you.
- Last update: November 4, 2020
Posted in Industry Insights
Fantastic Services manages 25+ professional home cleaning and maintenance services, provided within the UK, Australia and the USA. With 10+ years of experience behind our back, and 400+ of successful franchises, we continuously set the bar higher with our cutting edge technology implementation and marketing approach. Explore our business opportunities on the main website!