Franchising is an agreement or license to sell a company's products or service exclusively in a particular area or to operate a business that carries that company's name. The word Franchise actually means to be free. In a franchise purchase, the franchisor licenses franchisees to use their trademarks, business systems service marks, logos or advertising to identify its franchisees’ business. The franchisee pays an initial fee and royalties thereafter to do business under the franchisor’s name and system.
The franchise sector has been expanding at a faster pace than the overall business sector in recent years. According to the International Franchise Association (IFA), from 2001 to 2005 the output of franchised businesses grew by more than 41 percent, while the economic output of all businesses grew by only 26 percent. The overall economic output of franchise businesses is expected to rise nearly three percent in 2010. By combining business ownership with a well-known brand name, experience and an established franchisor, franchisees and franchisors form a unique, mutually beneficial business relationship.
Benefits of Franchising
Owning a franchise offers most of the benefits of traditional business ownership with far less risk and provides additional aspects to assist with success. By buying into a franchise, you have the immediate backing of a recognized brand with a proven track record and business system. A franchise system also generally offers:
- Training and support
- Real estate assistance
- Start-up assistance
- Access to marketing and advertising programs
- Use of the franchisor’s business system