The franchisor

A franchisor provides a ready made, established and usually successfully business to the franchisee. Along with this they typically supply the brand name, economies of scale, buying power, know how and business process.

Benefits

Benefits to the franchisor is that they can extend dramatically the volume of managed outlets they can sell their product or service from (although at a lower margin as the franchisee gets a cut)

The franchisee

A franchisee buys the licensed rights to operate under the purchased brand name utilising all the business processes and know how sold by the franchisee. The attractiveness of this concept allows any entrepreneurs or small business owners the opportunity to plug in an already proven and successful brand – all the franchisee needs to do is go out there and get those customers!

Benefits

The benefits to the franchisee are clear but make no mistake there are some risks, franchises come with a level of investment, if you misjudge your target market or manage the business poorly a franchise will fail like any other business – but the key benefits are clear:

•    An existing recognised brand name

•    Established business process to work with

•    A safer business environment

•    An established supply chain

•    The benefits of profiting form an individual business

Basic types of franchise

Theres a vast variety of franchise relationships when you get under the skin of the business model – small business world will now help you clear up what might be attractive to you:

Investment franchise

Typically high cost the franchisee puts up a higher investment to retain overall strategic management. Common examples of these are hotels and restaurant franchises.

In short – costs are higher but rewards are the best!

Management franchise

Management franchisees are when an operative manages a region or a number of territories. Examples are van hire franchises run from regional depots.

Executive franchise

This is typically a one man white collar operation very popular within financial services, consultancy and project management. An office or fixed premises are not essential and work is conducted on a client by client basis.

Retail franchise

This is where a significant investment is made in commercial property, equipment and staff to operate a high yield business system. Such franchises when sold are often profitable as the franchisee capitalises on the complete investment. Examples of this are high street retail units.

Sales / distribution franchise

This is your classic travelling sale man type franchise. An operative on the road selling and distributing products – whilst it sounds like a door to door job, successful franchisees in the right industry are earning six figure salaries annually.

Mobile serving franchise

This is where a franchisee invests a comparatively lower amount for a man and van type operation. This type of franchise is popular in manual services, cleaning and motor servicing.

What’s involved?

Before you leap in to the world of franchising and decide to sign on the dotted line, here is what’s involved:

•    Capital – some level investment is always required in a franchise, this allows set up, license fees and payment to your all important franchisor and get your business launched.

•    Time – as with any other business time and the input of it is a crucial factor that determines the success – franchises are not different so get ready to put the hours in!

•    Effort – commitment to the brand, project and its success is key – get ready to get stuck in!

•    Family – get their buy in and even help – its going to be all hands on deck!

•    Security – dependant on your financial situation you may need some type of security, think carefully before you commit and consider your financial position

•    Experience – get ready to employ what experience you have form whatever you have done in the past, it all counts