Buying a Franchise
Posted: Thursday July 11 2019
By: Needle Partners
Buying a franchise can be a great way to start a business without having to come up with an idea or brand from scratch. An established franchise network will allow you to piggy-back onto somebody else’s concept and business structure and benefit from their experience. If you are considering buying into an existing franchise system it is useful to understand exactly how franchising works.
By Sharon Needle – Needle Partners
Franchising is setting up a business under a licence from a franchisor (who can be a person or company but is typically a company) so that you carry out a business based on a model and concept that the franchisor has already established.
In practical terms it means that your business operates under the franchisor’s organisational umbrella for a fixed number of years and uses its branding, business model, knowledge, expertise and ideas in exchange for monetary consideration in the form of an initial franchise fee and ongoing fee(s) which are typically based on a percentage of your business turnover. The person (an individual or company) that takes on the licence to do this is known as a franchisee.
Depending on the type of franchise business (and franchising business opportunities exist across an extremely wide range of business activities from coffee shops, fast food businesses, cosmetic companies to cleaning services) the franchisor will provide intial training and ongoing support to the franchisee. What that looks like will depend on the type and size of the franchise – some larger franchisors will organise national or even international conferences (Vegas anyone? ) while smaller franchisors may offer monthly catch up meetings and or calls.
The commercial arrangement between the franchisor and franchisee is primarily set out in a franchise agreement – the legal contract that is entered into between the franchisor and franchisee.
Buying a Franchise – All Franchises Are Not The Same
Not all franchises are the same so if you are interested in starting a business by buying into an existing franchise arrangement you should initially look at the information pack that franchisor’s will send to prospective franchisees. You may want to look at a number of these in the type of business you are interested in.