What is Franchising - The Ultimate Guide You Must Read

What is franchising? Read the ultimate guide on franchising from origin to benefits here on trendsinsights.

What is Franchising - The Ultimate Guide You Must Read

1. Origin of Franchising

Whenever we hear the word "Franchising", most of the people think about the name or company that comes to mind is McDonald's. But let me tell you guys that franchising has it's older roots than the fast food giant.

The concept of Franchising originated in the 1850s with Issac Singer, American inventor who developed and brought into general use the first practical domestic sewing machine. It is believed that Issac Singer was looking for ways to distribute his sewing machines. Then he began selling licenses to entrepreneurs in different parts of the country. This business way proved to be a predecessor of the current franchise agreement.

2. Introduction: What Is Franchising?

According to the IFA (International Franchise Association), Franchising is defined as below:

A contract between the franchisor and the franchisee in which the franchisor grant rights to franchisee in his's business system wherein franchisee operates under a common trade name owned by the franchisor, and in which the franchisee will make a substantial investment in terms of his resources or capital.

In simple words, franchising is a concept based on marketing which can be adopted by an organization as a marketing strategy for their business expansion. It is a form of marketing in which the franchisor (owner) grants to the franchisee(individual or group of individuals) the rights to sell products or provide services using the franchisor's business concept.


3. Key Steps to Choose the Most Profitable Franchise for Your Business


3.1 Determine if Franchising is Right or Not

In my opinion, this is one of the crucial steps to make when it comes to franchising your business. You need to align your personal and business goals with franchising because you will be responsible for training and recruiting for franchisees as your business grows.


3.2 Trademarks

It is a necessary process. You must register trademarks for your franchising.


3.3 Document Disclosure For Franchise

You should be prepared with FDD (Franchise Disclosure Document) for the franchise you are offering that contains specific franchise laws according to type of franchise. 


3.4 Operations Manual for Franchisees

To know about all system requirements and the information needed to operate the franchised business, you should provide a manual to your franchisees.


3.5 Make Franchise Sales Strategy and Set a Budget

After completion of basic steps, you need to develop the best marketing strategy for selling your franchising so map the best strategies for franchising with a realistic budget for training and supporting franchisees. 

While Developing strategy you need to make a note of following points

    • 1. What are initial goals for franchise and what are qualities your franchise will offer in market
    • 2. Investment in terms hiring, training franchisees and capital too
    • 3. Marketing Strategy to sale franchise and to generate brand value for your franchise
    • 4. Set target to generate leads

Generally the franchise development process takes 2-3 months to become a franchisor legally so that you can sell and offer franchise to franchisees. 


4. Benefits of Franchising

There is no doubt that many people want to do their own business that turns to franchising which provides many benefits. 

Let's get started…


1. Capital

The primary benefit franchising provides is that obstacles to getting financing could be lessened. The most common barrier faced by today’s small businesses is lack of access to capital. In franchising, franchisees invest their own capital, so franchisors have the benefit of using other people's money to level up their business rapidly rather than searching for investors or lenders.


2. Increase Speed of Growth

In my opinion, there is no entrepreneur who doesn't want the success rate to be fast. Every entrepreneur dreams about rapid success for their business. Franchising is one way that franchisors ensure a good position in the market for their product or service, and compete with their competitors. As franchising involves a number of franchisees so with minimum time and efforts they can hold a good brand value for their business.


3. Management

One of the key aspects in achieving success is Management. Many entrepreneurs faced obstacles in their business due to lack of proper management. But franchising provide flexibility to business owner to overcome this thread. As your franchisee will be an owner and no one is more motivated than one who invested in the success of the operation. Franchisees personally will keep their eyes on the equation in terms of investment or other resources. This reduces the efforts of franchisor.


Some Words to be Note:

In the end, You can consider franchising as a marriage. A good match between franchisor and franchise makes franchising successful by sharing common goals by both the parties over the long term.


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