What is a franchise? Simply speaking, franchising a product means that you give other person the right to market your product under your trademark. In other words, if you buy a franchise from a company, you have the right to sell the company’s product using the company’s trademark for your store. Take a look at McDonald’s, for instance.
The one who purchases a franchise is called as “franchisee” while the one who sells a franchise is called “franchisor”. Any kind of business can get into this franchise system. It is not just limited to fast food business like many people think. In fact, there are more than 120 kind of franchise businesses we can find these days that include financial services, automotive, health, and many others.
The most obvious advantage from purchasing and running a franchise is perhaps the trademark of the company or the company’s brand awareness. Consumers have more faith in buying stuff from a reputable company so that the profit may be bigger, depending on how the franchisee runs the business.
Other advantages include the full support provided by the franchisor to the franchisee. The franchisee usually also gets an extensive training to know every single thing about the product. However, note that a franchisee must run the business under the rules established by the franchisor and there is an one-time franchise fee that must be paid by the franchisee to the franchisor as well as an ongoing franchise royalty fee.
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