What Is A Franchise?
Overview Of A Franchise Business
Franchises are all around us. Drive a few blocks to or from work, and you will see franchise businesses everywhere. From fast food chains to muffler repair, pest control, and even hotels, franchise opportunities abound. However, not many people understand what classifies a business as a franchise, or what makes franchise opportunities so attractive.
A Standard Definition Of A Franchise
As it has existed for hundreds of years, a franchise is a business model founded on licensing a name or trademark to others in order to achieve wide distribution and sales. The parent company (franchisors) will sell these licenses to potential franchise owners (franchisees) so that both parties can reap the benefits from sales to customers. The franchise agreement is usually renewable, meaning that franchisees have to pay into their respective franchise systems to continue using the branding and marketing materials, and to sell proprietary goods and services under the franchisor’s name. But the essence of franchise businesses does not end there.
One key quality that defines a franchise opportunity is the ability to duplicate the same business, regardless of location. When you think to yourself, “What is a franchise?” you only have to think of any chain restaurant in your area. Operations are streamlined to require minimal thought and logistics. Equipment and supplies keep overhead low, even in upscale franchise chains. Before a business becomes a franchise and starts licensing out its name, it spends a lot of time making the entire operation as efficient as possible, in order to minimize the likelihood of setbacks, and maximize profitability.
How Do Businesses Become Franchises?
Not every business fits the franchise model. Those that do either follow a small assembly line model (such as Subway), or they offer more detailed services which can be itemized and delivered easily. Once a business owner decides to license their company’s brand as a franchise operation, it is time to look at the guidelines put down by the Federal Trade Commission. By law, all franchise businesses must offer a Franchise Disclosure Document (FDD). An FDD gives complete transparency between franchisors and franchisees, detailing the company history, the executive officers, any history of litigation, financials, and – perhaps most crucial – the specific terms under which the franchise is supposed to operate, any fees required, as well as any other legally binding agreements. Once a business complies with federal laws regarding franchises, it can then offer franchise opportunities to potential owners.
Not many people think about this aspect when asked, “What is a franchise?” One of the core tenets to every franchise business is building relationships. After all, starting a franchise in any area will affect the community at large. Franchisors want to provide an environment that is satisfying to franchisees and their employees. They also want to provide a business that customers also enjoy, because the consumer base has the money.
By building relationships with all parties, it reflects well on the franchise brand, and people will continue to work for and do business with the franchise. It is often said that McDonald’s does not sell food, they sell happiness. And it is true. There is a reason McDonald’s is considered the “ambassador to the world.” It is because the franchise takes pride in making the experience pleasant for everyone from the customer to the employee to the franchise owner. Similarly, franchised hotels sell rest, and pest control franchises sell peace of mind. The franchise’s particular philosophy should shine through in its relationships with everyone.
What is a franchise business? Any franchise opportunity worth its salt has built-in support systems to help owners and employees. For some, franchise support systems could mean standardized training, so franchisees have a well-oiled workforce. For others, these support systems offer advice on how to improve sales, or overcome obstacles such as a sudden shortage of supplies, or inroads to vendors and maintenance companies. Franchise support systems are standardized to deliver consistent results, and they promote success. One of the reasons franchise opportunities attract so many potential business owners is that the support systems are in place to prevent franchisees from failing. Contrast this with startups, where the likelihood of long-term success is very slim, with no safety net.
When you ask the average person, “What is a franchise?” fast food is the typical response. However, franchising has become an industry unto itself. Franchises now span every facet of the economy – from food and hospitality, to personal finances, automotive care, advertising, security, and even healthcare. A franchise opportunity can be found for every interest, and the streamlined business model already has figured out how to monetize those interests for maximum impact.
Not many people discuss this aspect of the franchise business model, but it is one of the oldest forms still in existence. Distribution franchise businesses sell licensing for others to carry and use their products. For instance, you may have seen automotive repair shops that are certified or licensed to work on a particular type of car. Or your employer may work with certain licensed IT vendors for the corporate network. This means that those places pay a fee for the ability to sell or utilize brand name parts and products in their businesses.
While distribution franchises are typically very specialized, they also bring in more sales than standalone retail franchise businesses, by volume. Let us take McDonald’s as an example, because it is the most accessible franchise in most people’s minds. Every McDonald’s establishment uses specific equipment. However, McDonald’s neither manufactures nor repairs their appliances. Rather, McDonald’s has an agreement with certain manufacturers, vendors, and repair companies and pay for the license to use their products and brands. The same with Toyota repair shops and Cisco network systems. Distribution franchises make up a large part of the franchise industry, supplying roughly half of the sales.
There comes a point in every franchise business owner’s career when it is time to move on. Some franchisees become very successful and end up owning multiple establishments, but realize it is time to retire. Others want to try their hands at starting their own business from scratch. Whatever the reason, franchise businesses have built-in exit strategies for franchisees, whether it is selling off the establishment to another prospective owner, or transferring ownership to another family member or manager. While franchises may handle exits differently, they are all required to have contingency plans for such an event.
So, What Is A Franchise Business?
With all we have discussed in this article, you can get a fairly good picture of what is a franchise, and what is not. A franchise is a “turn key” business model that allows emerging business owners to become successful, without having to put in a lot of late nights, or struggling trying to make ends meet without a fallback plan. A franchise provides all of the branding necessary to attract customers, as well as the built-in support systems to give the right training and help to streamline operations as much as possible. Franchises are about building relationships at all levels, and even offer exit plans when franchise owners move onto greener pastures.
Business Idea Similar To A Franchise
For those emerging business owners who want a “turn key” operation, consider the Commercial Capital Training Group (CCTG). CCTG operated very much like a franchise, in that it provides the training, branding, marketing, and support systems necessary to ensure success. Where CCTG differs from franchise businesses is that your company is your. Your business name, logo, and website are owned by you. The marketing and branding is designed and tailored to fit your business. Most importantly, your successes and profits are yours.
The Commercial Capital Training Group gives people the knowledge and tools to launch a business in commercial finance. We teach people everything from basic lending to things such as factoring, mezzanine financing, and more. We also give people the ability to bring business owners in need of funding together with investors, and have them come to an agreement. Once signed, that agreement generates revenue for you and your operation. You set your hours, and you can even work from your home office. The overhead is extremely low, and the profitability is virtually limitless.
Many of our graduates have never owned a business before, and were once thinking about owning a franchise. They are now running their own businesses. Putting in a few hours every week and making healthy profits from closing deals. As well as residual revenue streams from previous successes. If you ever need clarification, our financial and technical teams are available 24 hours a day, seven days a week. So stop looking for franchise opportunities where you are beholden to a large corporate entity. Embrace your own financial independence with Commercial Capital Training Group. We believe everyone has the right to achieve their dreams. We will give you the tools and training to make that a reality.