Entrepreneur, Franchising

What is a Franchise Business?

Business Advice | 14 February 2023 | 1 year ago

There are a lot of different ways of becoming someone who runs a business, and starting a franchise business is one of them. In this blog, we take a look at franchise businesses and whether they’re right for you.

What is a Franchise Business?

A franchise business is one where various parts of the business are licenced out to other people, allowing them to create their own versions of the business. This allows them to sell products or services via the business’ name, which can be beneficial if it’s a well known brand.

How Does it Work?

When someone has a successful business, they might choose to franchise it. This gives other people the chance to run their own version of the company. In order to run a franchise business, you must pay a purchase fee to the owner. There are also a number of ongoing costs, such as royalty fees. Effectively, you are paying for the right to use the business’ name and offerings. With this cost, you are given the right to use what the original business already has in place, including trademarks and branding. This sometimes includes training, equipment and advice.

What are the Benefits and Risks?

There are a lot of benefits that come with franchising a business. For example, you can utilise marketing and distribution solutions that are already in place, saving you time and money. There is no need to innovate, as everything has already been done for you. You really can get stuck into running a franchise business straight away. The main downside of a franchise business is that you don’t get a say in big business decisions, and you have to go along with whatever the business owner decides. This could mean having to compromise on what you want to do with your franchise because you are bound by them, or having to run the business in a way that you don’t agree with. Overall, there are fewer risks with a franchise business, but a lot less control.

Is Running a Franchise Business the Right Choice?

It’s hard to say if running a franchise business is the right choice for you, as it largely depends on who you are as a person and the type of business running experience you want. Running a franchise is similar to running a standard type of business, but with fewer risks. This is great news if you want a business that’s unlikely to fail. However, you will sacrifice control and some profits to the parent company, which can be a problem if you want to have a lot of control over decision making.

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