Franchise

An established concept can give you a head start

Taking on a franchise is an option worth considering for anyone who wants to run a business but doesn't have a specific business idea or prefers the security provided by an established concept.

The right franchise can give you a head start. Instead of setting up a business from scratch, you use a proven business idea. Typically, you trade under the brand name of the business offering you the franchise, and they also give you help and support.

Successful franchises have a lower failure rate than completely new businesses. However, you will still need to work hard to make the franchise a success and you may have to sacrifice some of your own business ideas to fit in with the franchisor's terms.

The term "franchising" can describe some very different business arrangements. It is important to understand exactly what you're being offered.

This is the most common form of franchising. A true business format franchise occurs when the owner of a business (the franchisor) grants a licence to another person or business (the franchisee) to use their business idea - often in a specific geographical area.

The franchisee sells the franchisor's product or services, trades under the franchisor's trade mark or trade name and benefits from the franchisor's help and support.
In return, the franchisee usually pays an initial fee to the franchisor and then a percentage of the sales revenue.

The franchisee owns the outlet they run. But the franchisor keeps control over how products are marketed and sold and how their business idea is used.

Different types of sales relationships are also sometimes referred to as franchises. For example:

Distributorship and dealership: you sell the product but don't usually trade under the franchise name. You have more freedom over how you run the business.

Agency: you sell goods or services on behalf of the supplier.

Licensee: you have a licence giving you the right to make and sell the licensor's product. There are usually no extra restrictions on how you run your business.

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