What Is A Franchise?

A franchise is in essence a contract, agreement or license entered into between two or more consenting parties which stipulates that a person or a group of people (that is, the franchisor) bestows the rights to market a service or product or set of products using the trademark of its business to the other party (known as the franchisee).

If you're looking to set up a business, if you've seen an investment opportunity or you want to leave the nine to five slog of the office and go out on your own, you may have looked into franchise opportunities. If you are already running a self-owned and self-run business, you are probably familiar with franchises too. For those who aren't familiar with the concept, this article explains what franchising is and how to avail of the many related opportunities that are out there.

You see franchises in the various chain stores, big name convenience stores, and the famous fast food restaurants. Many McDonald's locations may in fact be franchises, where the franchisor (McDonald's) has sold the rights to sell its food to a franchisee that runs the outlet. The same can be said of the big-name pharmacies you've heard of or the 7-11 stores found on many corners. Many well-known, big name companies operate under franchises, as it's easier to sell brand rights than to run a whole chain of nationwide outlets directly. So while some outlets may be corporate-owned; oftentimes a good franchisee is the manager, and thanks to extensive branding, advertising, and the uniformity of the stores or restaurants, you probably won't even be able to tell the difference.

A franchise opportunity arises for a potential investor when a franchise outlet or new store comes up for sale. Franchisors often provide help in setting up the outlet, and the success and fame of the brand name is an added incentive for a potential investor.

The franchisee has the edge over the competition as customers associate the big brand name with quality, tasty food, trustworthy and efficient service or whatever else the company is famed for. Customers may see the logo from the highway, and the recognition factor means that they know immediately that they can go there next time they're passing to pick up a tasty meal or a litre of coolant for their engine. There are many benefits for the franchisor too. The franchisee can devote time to developing the business that the head of the company cannot. Any problems the franchisee encounters, he can report back to the head office, and the franchisor can warn new franchisees of the potential problem and how it can be avoided. Meanwhile, the franchisor's outlets continue to grow and with it the brand name and trademark.

So franchises are a two-way street, a great opportunity for small investors and big multinationals alike.