Starting your own franchise can be an exciting, and lucrative venture. Instead of starting your own business, you take over a famous franchise. In fact, the benefits are many. You will face a much lower risk, due to the fact that you are dealing with an already tested formula. There is no need to worry if anybody will like this business idea, since it has been already proven for you.

branding - Franchising 101: Теrms, Tips, and Facts

Furthermore, you won’t have to build up a brand, the brand is already there. Of course, you shouldn’t run the company’s reputation into the ground, but the free marketing head start is worth it. Not to mention that you get a clear system of operations, logistics, and training already in place. Of course, all this stuff needs to be implemented and handled correctly, but, essentially, you get everything you need for a successful business. And there is so much room in choosing the franchise as well. You can choose whatever you are passionate about. Anything from the food industry, to retail, sportswear. Artisanal tea and coffee houses are making a boom as well. There must be something that you are interested in.

Now, of course, before you dive in and get a franchise, you should educate yourself as much as you can about the topic. This article covers terms, tips, and facts that are supposed to get a handle over a franchise you’re interested in.

Terminology:

To start a franchise, you need to master the language and the terminology involved in running a franchise.

  1. Franchisor: A franchisor is a company that decided to offer a franchise to an investor. They want to expend their business by giving this opportunity to people who would wish to run one location, or even territory, for their business.
  2. Franchisee: This is the person who is thinking about buying a franchise in order to make a profit, becoming, essentially, a business owner.
  3. Franchise fee: The franchise fee is the fee that you need to pay to the franchisor so you can become their franchisee. This gives you the rights to operate the franchise for the given location and territory, but is, of course, usually a (not so) substantial sum of money.
  4. Conversion franchise: When a business decides to come under the franchise system’s wing, they are seen as a converted franchise. This formerly independent business comes under the umbrella of the franchise, so they can utilize the brand and systems of said franchise.
  5. Franchise Broker: Also known as the consultant, this person assists the franchisee with choosing the right franchise for them. This can be as simple as presenting you with a list of franchises, to as complex as having systems, programs, and models that are supposed to help you find the right franchise for your personality and leadership style. They should also give you a somewhat clear idea on what your expenses and revenue would be.
  6. Royalties: Royalties, or royalty fees, represent the money the Franchisee pays to the Franchisor. This is the main way Franchisors make money off of their franchising licenses, are they usually make up a percentage of monthly sales. Sometimes, however, it can be a set, pre-agreed, fee.
  7. The IFA: The International Franchise Association is the body that deals with and tracks franchises. It’s based in the USA, in Washington, DC , and is an excellent source of information and knowledge for franchising.
  8. Protected territory: This is an agreement where the franchisor is obligated to not develop any competing business or more franchises on a given territory. It essentially means that it won’t create competition for the franchisee. This is often a clause in most franchise contracts. The territories are set out in the actual agreement, and are usually defined so as to create minimal or no competition for the franchisee in question.
  9. In-House financing vs. Third-Party financing: These two terms signify who is financing the franchise. The first one means that a loan is issued by the franchise company itself, perhaps through a banking program. Third party means the loan is given by an outside lender (a bank, or a third party).

Facts:

  1. There are many viable franchises to choose from. In fact, the IFA states that there are hundreds of thousands of franchises in over 300 countries around the world. And know that they aren’t only set on fast food. See where your interests lie. There are successful business whose whole business plan centres on tea. In fact, the artisanal food and drink world is very popular and successful, as you may have noticed by looking at all the craft beer bars and coffee houses springing up.
  2. Franchise contracts usually last around 10 years. Of course, this is the average, and you are sure to find some shorter or longer ones as well.
  3. It’s much easier to get a line of credit to finance a franchise business than it is a regular one. The reasons being is that it’s a tried and true company already, that has proven itself in the business world. This makes it seem like a much more serious and viable investment.
  4. Don’t worry – franchises are seriously regulated. They are tracked and followed by many contracts and regulations that are there to protect the franchisor, and the franchisee.

Tips:

  1. Remember that even though you are running a franchise, you can’t go in blind. You need to think of a good business plan, and treat the whole venture as a real business that you started (which you, in a way, have).
  2. Before you meet up with a Franchise broker, do your homework. Read up on and research the franchise you are interested in, and do the same for the industry it’s based around. This will make you seem much more serious about the whole business. Furthermore, it will also help you protect yourself in the unfortunate situation where the broker may not be the most competent or honest of individuals.
  3. Regulations vary from country to country, from region to region. While the core idea and system is pretty much the same everywhere, certain finer points and details may vary.
  4. Running a franchise is much like running a regular business, meaning you will have staff, fees, bills, logistics… The main difference is that everything is much more streamlined, and made simple, for you. Still, you will have to motivate your employees, set schedules, deal with suppliers, and, of course, give the customers what they want.
  5. Keep in mind that some franchisees have relationships and deals with some banks. This means you can get a better deal for a loan at a bank that was working with franchise brand for some time now.

Conclusion

Running a franchise is much like running your own, brand new business, and so needs to be taken just as seriously. You need to be thoroughly familiar with all the terms, rules, and regulations that are relevant to owning a franchise. Thus, research as much as you can, keep the tips and facts we set out above in mind, and you will certainly make the profits you want.

Chloe Smith is a design enthusiast and a part-time writer always willing to share tidbits of advice. She believes that passion, courage and, above all, knowledge breed success. When she’s not working, she’s probably somewhere cuddled up with a good book, and a cup of lemongrass tea (or more honestly binge-watching the newest Netflix hit show).

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