What is franchise? What does that word mean?

A franchise is a business that someone else has created, that you can buy and run a part of as a franchisee.

Under a franchise relationship, the owner of the business system is called the franchisor. The franchisor sets up pilot stores to test and refine the business. The business has been tested and refined so that anyone can pick up a book called the ‘operations manual’ and run the business successfully. You are buying access to these systems.

What is a franchise fee?

A person who wants to run part of that business, normally a store, pays a fee to the franchisor to access the knowledge from all of that testing. This is called a franchise fee. All of the policies and procedures for that business are written down in the operations manual. There are minimal decisions to make about branding, uniforms, store fit-out and product. The franchisor gives the franchisee support with deciding where to set up, development, training, access to the brand name, marketing strategies and operational support.

Since the franchise is a business system that someone else has created, you are able to set up a store starting with very little and be guaranteed customers, because the franchisor owns and has developed and marketed a brand that you have access to.

What is a franchise brand?

The key to successful franchising is the strength of the franchisor’s brand. A weak brand means customers won’t know who you are when the doors open. But a strong brand means as soon as your signs go up, people start talking and customers are excited for your store opening. This is the power of a franchise brand – the customers know what to expect when your doors open. You will have a connection to your customers, and they will be drawn in by the trust they have for your brand. The franchisor will support you in setting up marketing which uses the power of their brand.

What is a franchise relationship?

The franchisor should support franchisees and give them the support they need to do well. The culture of the franchise says a lot about how valued and looked after the franchisees are. Top leadership in the franchisor’s company will set the direction of the franchise, and this will filter down to the franchise trainers, franchisee support staff and the franchisees too. You can get a sense of how strong the leadership is by talking to existing franchisees.

What’s my next step?

I have talked to a lot of people in my years working with franchisees, and every one of them is willing to talk to someone who is thinking about setting up a franchise. Before you answer that question, “What is franchise and is it for me?” get out there and chat to existing franchisees – they are more than willing to share!