Energie Fitness: What is a franchise business?
When it comes to owning your own business, there are a number of different routes you can take. This could be starting a new company, buying an existing business or franchising a business.
In the UK, the number of franchise businesses has risen by 14% in the past few years. But what is a franchise business? Below we look at what it means to franchise a business, and what you need to know when looking to invest in a franchise.
Franchising: a definition
A franchise is a type of business where an individual (the franchisee or franchise owner) buys the licencing rights to operate using the name and business processes of a larger, often national or multinational, brand (the franchisor or franchise operator).
Popular brands such as McDonald’s, Subway and KFC are all examples of franchise businesses, with units in different locations being owned and operated by individuals. Often a franchise owner will own multiple units of the same franchise.
The franchisee-franchisor relationship
Franchising offers franchisees the benefits of owning a business, backed by the systems and support of an established brand. This includes site selection, marketing support, training, operational handbooks, supplier discounts and much more. You’ll also be part of a wider network of franchisees who all have a vested interest in the success of the brand and work together to achieve this.
To access this, franchisees pay an upfront licencing cost plus an ongoing percentage of royalties or monthly fixed fee- the exact cost of which varies from franchise to franchise. The philosophy of the franchisor dictates the monthly charging method they use. It’s also important to recognise that, while you own your own business, franchising imposes certain conditions (such as pricing and standards) that you must meet which you may find restrictive. As such it’s important that you understand the advantages and disadvantages of franchising and whether it is right for you.
Choosing a franchise model
There are many different franchise business models, so choosing the right one is really important. There are a number of things your need to consider, including:
- Is the franchise profitable?
- How is the brand perceived by the general public?
- What support is offered by the franchisor?
- How does this compare to others in the same field?
- How selective is the franchisor when it comes to choosing franchisees?
- How does the franchisor monitor standards across its network?
It’s also really important to choose a franchisor that operates with integrity and whose goals fit in line with your vision, values and purpose. Don’t just look at the marketing materials provided, speak to other franchisees in the network and find out what it’s really like and how they feel about the business.
