What Does Franchise Mean?

A franchise is when someone pays to set up a branch of an already successful business. For example, some of the McDonald's fast food outlets are franchises.

• The advantages of a franchise

There are many different advantages of franchising a business, both to the franchisor and franchisee.

The franchisor would benefit from this business arrangement as they would not need to pay to set up another branch of the business, as this would be the responsibility of the franchisee. They also would gain a percentage of any of the profits made, without the added hassle of running the business themselves.

Finally, the last major advantage that the franchisor would gain would be the advertisement that the growth of their business would give them; more people would become aware of the company and its logo, and would therefore be more likely to consider them for their buying needs.

The franchisee would also gain from this agreement, as they would not have the hassle of finding their own suppliers, as they are required to use the ones that the franchisor dictates to them, to maintain the same standard of quality throughout all institutions.

Also, the business will already have a well established name, and so the franchisee has a greater chance of succeeding as consumers will not feel like they are taking a risk by using an unknown company.

• The disadvantages of a franchise

Again both the franchisor and the franchisee will see disadvantages of this way of expansion.

For example, the franchisor has to trust that the franchisee will not create a bad reputation for their business, with poor standards and customer service.

The franchisee will not be able to use cheaper suppliers to create a higher profit, nor be able to sell at a higher rate. They will also have to pay a percentage of the profits to the franchisor, and have no say in the way that their branch is set out

• Franchise means giving the exclusive right to interested parties to use the name and goodwill of a well known and established business in return of loyalty and an annual lumpsum. Franchiser is refered to the parent company (which is the well known and established company) while franchisee is the local company which agreed to do business with the franchiser.


• During the process of franchising the franchiser wouls help the franchisee to setup and run business by giving training, advice, supplying equipment and materials, and also assisting with the location premises and marketing. The franchiser charges a royalty for its service which is usually in the form of a lumpsum and a share of the profit of the business.

It means running your own company but under the name of an established firm. I.e McDonalds or Kentucky Fried Chicken or similar.

The term franchise means a privilege of a public nature conferred on an individual, group or a company by a government. Franchising is also quiet well known it is basically the system of doing business in which a franchisor licenses trademark and established system of doing business is given to a franchise in return for a fixed recurring amount.

It generally also has the clause of giving a fixed percentage on the total gross sales or gross profits along with yearly fees. A range of tangible as well as intangibles like national and international advertising, training and many varied forms of support services are generally given by the franchisor, and could also be compulsorily needed by the franchisor, which normally requires audited books, and may question the franchisee or the outlet with time to time surprise spot inspections.

Franchise refer to the methods of practicing and using another person philosophy of business

It's also worth noting that starting a franchise has other benefits. For instance if you wanted to start a gardening franchise the training involves a free trip to Australia!! That's a great incentive to start your own gardening business :) You will also be your own boss which has many advantages.