Ideas for Business Success: What is Franchising?

What is franchising? The word “franchising” is etymologically descended from the 14^th century Anglo-French word, “franchir,” which means “to set free.” One could therefore speculate that the franchising business model is based on a “setting free” or “liberation” of sorts.

Strictly speaking, the correct response to the question, “What is franchising?” is that it is a business model by which an individual gains the right to market the products or services of a given company for a specified period of time in a specified place.

Franchising has existed for a long time. Some say that franchising goes back to America in the mid-19^th century, when Albert Singer founded the Singer Sewing Machine Company. Singer would distribute his company’s sewing machines to customers far and wide and train them to use them. He would also sell entrepreneurs licenses that gave them the right to distribute the Singer sewing machines. However, there is evidence that franchising was practiced before that in Germany, among German brewers who conferred upon particular taverns the right to sale their ale.

Others trace the concept of franchising much further back in time, specifically to the Middle Ages. They view the practice by which leaders granted people the right to operate various commercial interests as a precursor of the present day practice of franchising. Perhaps a better example is that of the church and its expansion through Europe. Some might consider it offensive to describe the church as if it were a business, but there are certainly parallels to speak of. One might say that these parallels prove that successful ideas can be adapted to all sorts of situations.

 

Reconsidering the Question “What Is Franchising?”

 

However one chooses to answer the question, “What is franchising?” it is widely agreed that it is a popular business model. The success of franchising can be attributed to a number of factors that make it easy for entrepreneurs to get established in business. To begin with, franchising involves selling goods and services to a pre-existing market. Hence, one does not have to create a customer base from scratch. Also, with franchising, a successful business model has already been established, as has a brand name. Furthermore, the franchisor or originator of the franchise often invests in training the entrepreneurs to whom he or she sells the franchise. All of these factors save entrepreneurs time and resources.

So, in response to the question, “What is franchising?” one might respond that it is an innovative idea that has the proven capacity to “liberate” hardworking entrepreneurs and make successful businessmen out of them.

Master Franchising

There are two primary ways in which franchisors can guide and support their franchisees: direct franchising and master franchising. The first mode of franchising involves direct communication between the franchisor and franchisees. The second one involves indirect communication between the franchisor and franchisees through an intermediate figure, the master franchisee.

The master franchisee essentially takes on part of the role of the franchisor. He or she can only play this role in a specified territory. The role entails recruiting the franchisees and giving them the guidance, training and assistance they need. The master franchisee also receives the franchisees’ initial fees and royalty fees. He or she might have to pass some of these earnings to the franchisor if that is what their agreement indicates. In addition, the master franchisee has to pay a large fee to the franchisor at the beginning of their agreement.

 

The Characteristics of Master Franchising

 

Master franchising is advantageous for a number of reasons. These reasons could ultimately convince some to sign up for the position of the master franchisee. For one, the master franchisee does not need too much cash to begin with. Secondly, he or she can work as an independent business agent. This makes it is an attractive proposition for the up-and-coming entrepreneur. Master franchising sets the master franchisee right in the geographical vicinity of the franchisees. Hence, the master franchisee can communicate more efficiently with the franchisees and assist them more readily than the franchisor, who is located in another part of the country or in an entirely different country, can.

Unfortunately, master franchising is also characterized by disadvantages. These include the fact that the master franchisee cannot expand beyond the predetermined territory. Additionally, the contract that the master franchisee signs with the franchisor is typically a long-term one. Hence, if it turns out to have been negotiated to the disadvantage of the master franchisee, it can be a long time before he or she has the opportunity to renegotiate its terms or end it to pursue another endeavor. Master franchising is also beset by legal problems, likely due to the added layer of complications and inefficiencies that can only be expected with the introduction of an intermediate figure into the franchising process.

The franchisor that is keen on the rapid growth of the franchise but does not want to risk much of his or her own initial capital will typically opt to contract a master franchisee. If the franchisor contracts a master franchisee with the right skills and is able to match these with excellent resources, success is sure to follow.

How 2 Franchise a Business

For those looking to jumpstart their businesses’ growth, franchising could be a solution. However, they must first learn how 2 franchise before they can tell whether it is worth their time and resources.

Franchising does not guarantee success for every business owner who ventures into it. Because it is a long process and costs a significant amount, it makes sense to learn what kind of business makes a good franchising “candidate” and the logistics involved in transforming it into a franchise.

The best business to turn into a franchise is one that has shown consistent success after being expanded to encompass more than one unit. Thus, an ice-cream store with units at three locations, each of which has been raking in considerable profits for four consecutive years is likely to be a good candidate for franchising. Such a business will already have demonstrated that the idea behind it is capable of succeeding in different contexts.

This is not enough, though. The product being sold or the service being offered must be unique enough to make the business stand out, but it must also be appealing enough to guarantee that customers will be drawn to it. In addition, it is important to do market research to establish that there is a demand for the kind of franchise being proposed. These are all critical steps in figuring out how 2 franchise a business successfully.

 

How 2 Franchise: The Ideal Franchisor

 

Successful franchising has to do with much more than the business itself. It also has to do with the business owner. Thus, if the owner of a given business, say, the ice-cream store described above, is not comfortable with the idea of ceding some control, he will have a hard time franchising it. A business owner who likes her business just as it is and is not itching to see it grow is also better off maintaining the status quo. Learning how 2 franchise would simply be a waste of time for her.

Franchising is ultimately a course of action for a successful and ambitious person who has made a splash with his or her innovative ideas. A prospective franchisor also has to be able to envision himself or herself in the managerial position. This is because, once the franchise is established, he or she will be responsible for marketing it to prospective franchisees and playing a supervisory role. For the prospective franchisor, learning how 2 franchise will mean learning to play a lesser role on the operational side of things and adopting a primarily supervisory role.

Franchising Documents

Franchising can be an overwhelming process due to its associated expenses, labor and reams of paperwork. Putting together franchising documents can be confusing and time-consuming, but there are ways of minimizing these problems and making the process streamlined and efficient. All of these approaches to simplifying the documentation of franchising have one thing in common: they involve seeking the guidance of more experienced people.

Franchising experience can be shared with prospective franchisors in a number of ways. One of these ways is through franchise consultation agencies or individual franchise consultants. The consultants in these two contexts are well-versed in the intricacies of franchising because of their special training and their experience helping other clients with their franchising needs. Some of them actually learnt franchising the hard way: by trying to franchise their own businesses and learning what worked and what didn’t along the way.

Ultimately, figuring out which of these consultants is the best for your needs will come down to his or her track record and your budget. If you choose to go with a consultant, make sure to get recommendations beforehand. The amount of money paid to consultants for help putting together franchising documents can be so high that you must be sure you are getting your money’s worth from the get go.

 

Using Templates for Franchising Documents

 

Another source of guidance on franchising documents is the franchise package, including all the document templates and instructions you will need to put together the franchising documents on your own. These templates and instructions will have been put together by professionals who are intimate with the franchising process and have themselves helped other clients to franchise their businesses. Hence their guidance will be a great comfort to you. Of course the process will not be an interactive one: you will not be able to talk to the people who compiled the document templates and ask them questions that are unique to your circumstances. You will have to resolve any issues you encounter along the way by referencing various resources.

This can be a challenging way to put together franchising documents. However, if you are diligent, thorough and know what your best resources are, it is manageable. One advantage of doing things this way is that learning from experience empowers you to make more informed decisions about your franchise company. Another advantage is that it will save you lots of money if you succeed in doing it the right way. If you decide to follow this path, make sure to consult professionals for legal matters and matters relating to accounting. These are not areas where you should wing it, no matter how great you are at independent research.