What is a Franchise?

What is a Franchise?

A franchise is a license-type business that provides access to a franchisee to serve under the franchisor’s business system. It’s a form of marketing process that allows franchisees to use business knowledge and trademarks of the company. The franchisee runs a business along with its products, branding, and practice that is owned by a franchisor. 

Understanding Franchises

To grow its market share and accelerate its reach at a low cost, a business starts franchising. They increase their brand locations by selling the right to use their ideas, products, and brand name. An individual or group of individuals (franchisees) buy this right and start operating under the same name and an existing business model.

For entrepreneurs who are in search of a successful start, franchises are the most popular option them entering this competitive market. Purchasing a franchise means you are now part of a recognized brand and have access to its established system. You need not wait for the customers because your name tag has loyal followers who can reach out to you without spending any resources.

Franchise Rule

To join a franchise network, franchisees have to comply with the rules of the franchise. 

  • For operating a business franchisees pay regular fees, which can be in the form of a flat amount or a percentage-based fee. 
  • Franchisees have to follow a specific set of operations manuals like site selection, trademarks, management, and procedures.
  • For maintaining standards in business, franchisees have to follow franchisor-approved supplier lists.
  • Franchisees have to keep in view employment obligations while hiring employees.
  • Franchisees have to operate within a specific geographic territory. They have to take care of the Premises license and territory provisions.
  • Franchisees can use renewal provisions to renew franchise agreements in case of another term.

Franchise History

This Marketing concept dates back to the 1850s when a franchising plan was implemented by I.M. Singer Company and the McCormick Harvesting Machine Company to sell their products. Till the 20th century, little growth was witnessed in franchising. It was only in the 1960-70s people began to take a close look at franchising and started to understand its attractiveness. 

When we talk about countries, the leader in franchising is the United States. It’s estimated that in the United States, there are more than three-quarters of a million franchise locations, and in the world, there are around two million franchised companies. 

  • As per recent reports, there are 774,965 franchise establishments in the USA.
  • 8.19 million people employed by franchise establishments in the USA.
  • 787.7bn USD is the total economic output of franchise establishments in the USA.

Read more : How Many Types Of Franchises Are There? 

Importance of Franchise

When we talk about the importance of Franchises, the following are some widely recognized benefits of franchising

  • Successful business module.
  • Ready made business formula.
  • Tested products & Services.
  • Best Support system.
  • Brand recognition.
  • Marketing & Training support.

The top advantage of a franchise is that it’s a proven, successful system and tested model. The franchise is a successful business module that has hundreds of successful stories. Its ready-made business formula is a blueprint for growing constantly. They have tested products and services, meaning you need not strive for customer attention. Its tested products and services will increase traffic on their own and will attract buyers. With a franchise, one can get the best support system on each step and its brand recognition will help you to gain loyal customers. Franchises are a popular way to get different types of marketing and training support.

How to choose the Best Franchise

When it comes to choosing a franchise it’s very challenging for an entrepreneur because there are more than 3,000 Franchise options. So there are a few ways through which you can choose the best franchise for yourself.

Good at: to choose the best Franchise you need to figure out what you’re good at only then do you get the best fit for yourself. You need to note down the top skills that make you a pro. You need to list all those qualities that you are known for. If you are not able to get it then you need to go for A SWOT analysis. This simple Matrix will help you to find out your strength, opportunities, and threats and examine how good you are at business.

Franchise Opportunities: what you need to do is to match your top skills to franchise opportunities meaning you need to compare your skills and franchise opportunities and if your skills are matching with some of the franchise systems then the franchise is a fit for you. If you want to make it easier then you can take the help of your search engine and type, “franchise opportunities”. If it’s taking time then you can check out “The Top 10 Franchise Opportunity Websites”.  Choose as per your preference and start comparing your skills with franchise opportunities, as mentioned earlier. This can help you to choose the best franchise for yourself.

Trends: if you want to be one step ahead all you need to do is to become a trend-watcher. When we talk about Franchise the best thing is to keep an eye on marketing trends. The business that is trending is the top choice for the franchises because it has the potential to stay for a longer period. Go for good market research and know where the consumers are willing to pay and find out what business leaders are discussing. Remain updated with business websites and blogs that are trending to choose the best.

Read more : The Challenges You Will Face In Franchise Business

Franchise or Startup 

Are you confused about how to start a business and which way to go? Then we are here to help you out. It’s obvious that investors get confused and can’t decide whether to run a business of their own or buy a franchise. 

When you become a Franchise owner You get access to different benefits like you to become part of a recognized brand, proven module, successful brand, profit generation, support system, loyal customers, ready-made formula, and much more. 

By the time you become a part of a franchise brand, you are already operating a successful business system without much effort. A proven business record history gets attached to your location and you start getting technical support and training. The best part of a Franchise is that you have the satisfaction that you are running a business with the least failure possibility. Buying a Franchise means a successful business is waiting for you and you just need to be passionate about the business to grow much faster. 

Franchise systems vary as per your choice and requirements, it’s up to you whether to choose a traditional or a nontraditional location. Rest everything is already done for you, you have a loyal customer base, a perfect policy pattern, the best products and services, income generation support, and many other plans.

When you’re thinking of running your own business it depends on you, you have to think about many different factors to run a successful business. You need to keep in view how to manage and what to sell, you need to keep a close eye on the likes and dislikes of customers, moreover, you need to think about ways to generate profit. So all this is quite risky, and you are on your own in this whole journey. You have to work longer for hours without any expert training program indicating things are against you. 

The failure rate of startups is higher and as per a recent survey 20% of startups were unable to live the first year, 50% survived only till five years and 35% vanished after ten years. These figures can help you to understand whether to choose Franchise or Startup.

Key Takeaways

  • Franchise business model works, offering a stable and settled platform for entrepreneurs.
  • Its tested model frames a successful running business and hundreds of successful stories.
  • Approximately 2 million franchised companies.
  •  $826.6 billion output in 2022.
  • Net gain of 257,000 jobs as compared to 2021. 


In this business, world franchising is a major force and is growing constantly providing business owners with minimum failure risk. Every year franchises employ millions of people, 13,000 to 20,000 entrepreneurs invest in new franchises and 250 to 300 industries develop into a franchise. Buying a franchise is a great benefit for investors, it makes it worth investing in. Before investing in any business read its FDD carefully, if everything is right and as per your expectations move forward to invest and enjoy your dream franchise.

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