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The Definition of Franchising

By 2 August 2021No Comments

In business, franchising is the process of running a business with the help of some or all components of another successful business. In the past, firms would provide distribution partnerships or distributorships in exchange for the right to sell a product in a specific market.

Franchising vs Starting in a Business Alone

If you want to start your own company, but can’t decide whether to buy a franchise or start from scratch, then read on. Creating a list of the strengths and weaknesses of each option can help you to determine the best option for your situation and business idea. In the best case, franchising allows you to invest in an existing, profitable business model. At its core, franchising is about the franchisor’s brand value, how the franchisor supports its franchisees, how the franchisee fulfills its obligations to provide products and services to customers,  based on the branding standards of the system.

On the other hand, when you start your own business, you’re the boss, making all the decisions, setting your own schedule, and running the show in any way you like. No one can tell you what to do because you own it. Just like Bill Gates shines with Microsoft, as do many other entrepreneurs. Running a business from the basement, front door, or car trunk with less capital, part-time or full-time, is cheaper than buying a franchise. However, as the saying goes, there is no easy road to success. To turn your dream into a reality, you can expect to work long, hard hours, with no support or expert training. If this seems too burdensome, then the franchise route may be a more sensible choice.

Different Sectors you can Buy a Franchise in:

Job Franchise

This is typically a home-based or low-cost franchise, chosen by people who want to create and run their own small franchise business. Generally, the franchisee must purchase a minimum of equipment, limited stock, and in some cases a vehicle. A wide variety of services belong to this group, such as real estate service, shipping service, pool maintenance, corporate event planning, etc.

Supplier-Dealer Franchise

The supplier-dealer partnership focuses on the franchisee distributing the franchisor’s products. Franchisors often license brands, but do not provide a complete business structure in the renter. The product franchise mainly deals with large items. Sometimes, franchisors license not only the distribution, but also part of the manufacturing process, as in the case of soft drink manufacturers.

Business Style Franchise

Business-style franchises can also use the franchisor’s trademarks, but more importantly, they secure the entire system that operates the business and sells products and / or services. The most popular are fast foods, gyms, business services and more.

Investment Franchise

Typically, these are large-scale projects that require large capital investments, such as hotels or large restaurants. Most of the time, a franchisee invests money and has a contract to run the business and earn a return on their investment and a capital gain on exit.

Conversion Franchise

This is a modification of the standard franchise relationship. Franchisees adopt trademarks, marketing and advertising plans, training systems, and key customer service standards. They also tend to increase savings on acquisitions. Examples of industries are real estate agents, flower shops, professional service companies’ and other household services.

What is the Success Rate of Franchises in the UK?

According to the data from Franchise Supermarket, the franchise industry has contributed £15 billion to the British economy, an increase of 46% over the last 10 years. The total number of employees in franchising has reached 621,000, an increase of 70% in the last 10 years. The change of ownership in franchises is very low, only 4.6%, and the failure rate in franchises is much lower than in other startups. An impressive 91% of franchisees are declaring they are satisfied with their franchises. 20 years ago, the franchising industry contributed just £5 billion to the UK economy. Franchise statistics and facts are from the latest BFA/Natwest Franchise Survey.

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Sam Clayton

Franchise Manager