What is Franchising?

What is Franchising? Franchising is one of the most effective strategies for expanding a successful business model. Franchising provide the opportunity and ability to rapidly expand into new markets by granting others the right to use your business model to establish a new location while under your guidance and supervision per the terms of a “franchise agreement”.

Franchising Defined

Franchising is legal binding relationship; a form of a licensing agreement between the franchisor and the franchisee. When franchising your business, you, as the Franchisor, grant the franchisee rights to use your business model, and you license the rights to use you brand/mark, and other intellectual property, for an agreed upon term, in a specific area or location; and, you agree to provide initial training & ongoing support. In exchange for the rights to use your model and intellectual property, the franchisee agrees to pay you, the franchisor, an initial payment (“franchise fee) & ongoing fees (“Royalties”) throughout the life of the franchisee’s business.

The 3 Main Criteria: Being Classified as a Franchise:

  • Payment of a Fee: Fee’s represent any and all payments made by a franchisee to the franchisor (royalty, training, marketing, equipment, etc.) The FTC Rule set the base payment at $500. However, some states have enacted laws that have payment ranges from $100 to $1000 for the life of the arrangement.
  • Trademark use: This criteria is satisfied when a good or service that is sold or offered by the “franchisee” is associated with the trademark. The “trademark” does not have to be a registered mark, but it is strongly advised that it is. It could be a trade name or a service mark too.
  • Control: Exertion of “significant” control over the business, to include providing ongoing assistance or even providing a marketing plan for the sale or distribution of products or services. Basically, a “franchisee’s” reliance on the “franchisor” for business expertise on how to operate the business to reduce risk is considered control.

Franchise Growth

Franchising is an accelerated growth path for successful businesses. Franchising offers the ability to rapidly expand and distribute products and/or services in new and untapped markets.

People desire to be their own boss, and will invest their resources for the rights to be a part of a successful enterprise. Whether you need to quickly expand into new markets to establish market dominance for a new product or a specialized business, or seek to expand by capitalizing on the success of your business model, franchising provides a means to expand your business into new established markets, and share the risk and cost associated with your expansion goals into developing markets. Franchising provides the opportunity to accelerate market penetration.

Building Your Franchise Brand – Your “Mark”

Franchising is one of the greatest marketing strategies the world has ever utilized, and the franchisor’s trademark is one of its most, if not the most, valuable assets. You see these trademarks in almost every business industry in the market today – serving almost every city throughout the world. Your Mark represents success, and people want to be associated with a well-established, respectable brand name, and are willing to invest in the privilege, initially an ongoing. And by presenting a successful opportunity, you have an effective means to expand your brand’s presence locally, regionally, nationally, and internationally.

Franchise Network Trust & Support

You build trust in your community by providing by conducting your business with integrity when providing goods and/or services. Long-term franchisor success is built upon a similar trust – the franchisee’s trust in the franchisor’s ability to support and foster franchisee growth and success; trust that the franchisor will evolve the business over time to address market changes; and, trust that the franchisor will provide training throughout the life of the franchise relationship. In turn, the franchisor trusts that the franchisee will properly represent the brand; trusts the franchisee to serve in the best interest of the brand; and, trusts the franchisee will support others to help achieve network growth. This trust and mutual respect, and all it entails, is a key factor to achieve long-term success in franchising.

Franchising – A Historical Snapshot

Franchising, as we know it today, emerged in the 20th century with companies such as Singer sewing, General Motors, and Coca-Cola. However, franchising, in one form or another, has been expanding brands and building generational wealth since the middle ages. In fact, the etymological roots of “franchising” is found in many languages. The French verb “franchir” signifies “ to free”, the English words “Franc” & “enfranchise” mean “free” and “empowering those that don’t have rights”, respectively.

Interestingly, the term “royalties” is said to have derived, in part, from the term “Royal Tithes”, wherein Englishmen received a percentage of the land fees paid by serfs to nobility. Additionally, individuals paid “royal”ties to lords and king for the rights to operate a business in the kingdom (and for protection).

Throughout history, franchising has promoted economic liberation, promoting opportunity and the “freeing” of commerce. True to its roots, and fostered by humankind’s great entrepreneurial spirit, franchise success stories continue emerging across the globe, and new business concepts dot the landscape of our ever-changing world, creating generational wealth.

You established a profitable model, captured market interest, and now seek to expand–

Are you ready to start building generational wealth?

%d bloggers like this: