FRANCHISE
Franchise: the right or license granted by a company to an individual or group to market its products or services in a specific territory.
Franchising is one of the fastest growing sectors in the business world today. And that’s because franchising works. According to a study done by PricewaterhouseCoopers more than 9.7 million people in the USA work in the world of Franchising.
You will find Franchising in almost every industry, the fast food industry, home repair and remodeling, hotels and motels, education companies, health and wellness services and recently business support services. The busiest Franchising businesses are in the retail sector with over 50% of retail sales made at franchised shops.
History
The current concept of the Franchise dates back to the 1840’s in Germany, where major beer brewers gave exclusive rights to sell their products to certain taverners or pubs. But the grand daddy of the Franchising is Isaac Singer who in 1858 built the market for sewing machines using Franchising agreements similar to those used today.
Singer’s method of Franchising, the product distribution method, was picked up by other manufacturers including Coco Cola, who then distributed their product through local business people through the process of selling their bottling rights which enabled them to manufacture, store and distribute its soda.
What is it?
At its most basic level, a Franchise is a business relationship. A franchise business is a relationship link with a company with a product or service and an entrepreneur who wants to run his or her own business. The Company that sells the rights to the product is called the Franchisor. The business person who buys their rights is called a Franchisee. The Company that owns the product or service grants a limited license to the person who wants to sell or distribute that product or service.
The is plenty of franchise information available today, especially on the internet, but basically there are two types available, product distribution and business format.
Product distribution involves an agreement between the manufacturer and entrepreneur, granting them the rights to sell the manufacturers product, but not operate under the same name as the manufacturer.
The more common type is called business format Franchise. The company making the offer provides not only the product or service, but also licenses the entrepreneur with an entire system for running that business.