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What is franchising? – Franchising 101

by FranchiseShow247
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What is franchising? 

In a nutshell, franchising is when a company licenses its operations, products, branding, and industry knowledge to someone else and gives them the right to sell the service under the franchisor’s business. Usually, the franchisee will pay a start-up fee and annual licensing fees in exchange for the right to be able to do this. It’s a joint venture between franchisor and franchisee, a partnership between both parties. So for example, say I own an oven-cleaning company and wish to expand outside of my geographical location, I might look for franchisees who can take all the branding, products and knowledge I have accrued and set up successful outlets for themselves across the country, thus growing my business.

The concept of franchising actually began in America in the 1860s with the famous Singer sewing machines. The owner, Mr Singer, found that whilst he could produce his new machine, he couldn’t distribute and fix them nationwide, so started licensing out repairs to local tradesmen, who then also became salesmen too. As a result, the first franchise model was born!

Since then franchising has gone from strength to strength both in the United States and here in the UK.

Are franchises common?

The franchising industry has seen a huge explosion in growth over the last couple of years, particularly since the start of the Covid-19 pandemic. The British Franchise Association reports that in 2021 that there are over 22,000 franchises in the UK alone, with one in four of these running multiple locations.

Franchising is available across a variety of industries, from the cleaning sector to fast food outlets to car repairs. In fact, the top ten franchise businesses in the UK include McDonald’s, Molly Maid and Autosmart. Not only are franchise business incredibly common, they also generate a huge amount of income, contributing almost £17 billion to the UK economy annually.

Can you guarantee success from a franchise?

Unfortunately, you can’t guarantee success from franchising in the same way you can’t guarantee success from any other business you might set up. However, one of the benefits of a franchise is that you will have the tools and support from the existing business to take advantage of, meaning you’re not starting from scratch. Different franchises offer different levels of support, ranging from full marketing, accounting, branding, software and a huge support network to draw on, whereas others may give you a little more freedom to take control of those aspects if you feel you have strengths in those areas.

Can you franchise your business?

Most businesses can be franchised, but there are a number of things to consider before jumping straight in. For example, you need to ensure that your business has longevity – if you’re asking franchisees to sign up to a 5-year license agreement, you need to make sure that your business will stand the test of time.

You also need to consider whether you have the time and resources to support franchisees on their journey. In addition, can you provide the necessary manuals or documentation for operating systems for example? Thirdly, can the business be easily duplicated in another location? You may need to think about whether your product only has local appeal, or is it something that works universally throughout the country or even the world? What are the costs involved in franchising your business and is there scope within your business model to do this?

And finally, you would need to think about whether your franchise is affordable – you may have a great business but if it’s going to mean a huge investment from another person, you may find it difficult to get the necessary interest to grow.

Who can be a franchisee?

The good news is that anyone can be a franchisee! If you have ambition and a drive to succeed, as well as good levels of customer service, and a willingness to work hard, you could be a franchisee. Many people choose a franchise in an area they particularly enjoy or have a skill in, for example photography, or the care sector, and that can also help determine the success of the franchise.

Looking to invest?

If you’re looking for a franchise and don’t know where to start, take a look around FranchiseShow247 – a great online community that features the latest insight and information in the industry. From seminars, to talks, interviews and blog posts, FranchiseShow247 is a one-stop site for all things in the franchise industry.

This Blog post was written by Louise Miles from FranchiseShow247. Read more community insights over on our blog. www.virtualexpo247.com