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How Franchising Works

Written by: Michael Hemenway

Article Overview: How franchising works? It starts with the franchisor finding success with his product/service and ends with the franchisee finding his.

How Franchising Works

Franchising has always been there in the market, but it is only during the last few decades that it has become so popular. Today, people are starting a franchise not as a last resort, but as a career choice. When a system works so well, it’s quite natural to question how it works. So, here is a rundown on how franchising works.

• At first, a company, after failing initially and learning from its mistakes, finds success with a given product/service. There must be something unique about the product/service that can make it special among its customers/clients.
• The franchisor then perfects the system by running a second unit or by opening a model unit.
• After enjoying success with the second one and establishing brand awareness (at least in the local market), the company starts thinking about learning how to franchise the business.
• After learning the rules and regulations of the franchise industry, the franchisor prepares various documents such as FDD, franchise agreement and other related materials. Franchise fees and royalty fees are also fixed.
• A separate wing is established to oversee the franchise business for sale offers.
• The franchise businesses for sale offers are circulated in the market. The company may or may not introduce master franchise and area development offers.
• The first batch of people who apply to buy a franchise from the franchisor is screened. The people are selected according to their general business skills and experience. The net-worth of the candidates is also checked. Some franchise opportunities need specific professional training.
• The candidates are given the FDD, so that they can go through the franchise proposal of the company.
• Those who show further interest are called for the Discovery Day. The franchisor and the franchisee can meet for the first time during the course of Discovery Day.
• If the franchisee is interested in starting a franchise with it, the franchise agreement is given for review.
• Sometimes, a new franchisor may even allow some changes made by the franchisee.
• After the signing is over, the training begins. Other supports like real estate selection and leasing, remodeling the location, advertising in the market go on simultaneously.
• Grand opening announces the start of the franchise business.
• The franchisor periodically supervises whether the franchisee is following the rules. If the latter has any problem, it can call up the franchisor any time.
• The franchisee soon starts getting back his investment and another success story is born.

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Article Tags: brand awareness, business for sale, career choice, discovery day, franchise agreement, franchise business, franchise businesses, franchise fees, franchise industry, franchise opportunities, franchisee, franchising works, franchisor, general business skills, local market, master franchise, model unit, professional training, related materials, royalty fees



Related Forum Posts
Re: Re Franchise etc - [quote="bmueller47":e0j0nu4t]Can you see a shift of various types of franchises? What I am thinking about is that today it is more difficult to create franchises, that has great appeal. More and more people want to have their business, but no interference of someone else.[/quote:e0j0nu4t] Not sure what you mean exactly but it is certain that more and more people want to have their own business but not more and more people know what they really want to do, or how to do it. And that's what franchising is all about. Franchising is not for an entrepreneur. An entrepreneur will do his own thing. People who buy franchises want a turn key business, with a proven model. Franchising in the US had never been that good. I don't have the exact numbers in mind but I know for sure that franchising is growing more and more as people are getting more and more aware of this business model.
Franchising vs. Licensing? - What is your opinion on Franchising vs. Licensing? Which is better?
Nominations for a new Franchising Moderator! - Is there anyone you'd like to nominate as our Franchising Moderator (or volunteers for the position)?
Great Article, chock full of info. - Ian, Thank you for linking your article regarding Licensing vs Franchising. Its a good read.
Re: Hello from Captain Franchise - Hi BuzzAroundBooks, I actually found the site in my search for franchise networking. We're looking to make connections and also inform the general public about franchising. Franchising is often misunderstood because of the lack of knowledge. We're here to help and learn as well! Thanks!


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