What is franchising in business? Have you ever heard the name franchise? I am new to this word when I heard this name through my neighbor that he has opened a franchise shop. Franchise a French verb meaning to be free. Originally the purpose of this franchise was to allow the workers to start their own business that will be supported by the franchisors. At first, it started in the French by giving the crown owned land to the powerful individuals as franchise and make them manage the properties.
Franchising in business
The same method was introduced into the business and franchising in business also started. It is a joint venture between a franchisor and a franchise. The owner of the original business will be the franchisor and these men will sell the right to use its name and idea. The respective franchisee will buy this right and sell the franchisors goods and services. But everything will be carried out under the existing original business model and trademark. For instance, let we take it around in this way. It is a relationship between two individuals where one part allows another party to sell its own products or services. Several of the food chains like McDonalds and Domino’s in India run through franchising.
This franchising not only exist in business. It has it footsteps in distributing units, investment sector, manufacturing sector, job franchise, conversion franchise, multi-unit and single-unit franchising etc. It is to be proved that until last 2020 the franchise establishments in US were up to 753,770.
Is franchise profitable
If you ask that franchise in profitable. May or may not but buying a franchise might seem to be easy but the fees you pay to the franchisors will quickly cut your profit margins.
Advantages and Disadvantages
The major advantages may be the business assistance you get, and the famous brand recognition. The failure rate of franchise model will be very low except for the low profit margins. Then comes buying power. If you stand alone and starting a business, you need to handle all the orders and supplies and due to the individual business model, the cost may be high as your order is relatively small. Next advantage is you are starting a model with lower risk and there will be an already built-in customer base and you can be your own boss expect for the fee you have to pay for the franchisor.
While you see the disadvantages. There are many restricting regulations, and the initial cost you have spent will be very high. Next you have to cope with the ongoing investment also and finally lack of financial privacy.
To end with what is franchising in business. You have to analyze each and everything about franchise and franchising before stepping into this model.