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What is Franchising?

By:  Tom Buckley of First National Business Corporation

What is a franchise?

A franchise creates a legal, binding relationship between the owner of a trademark or service mark, or trade name (franchisor) and an individual or other legal entity wanting the right use that “mark” for profit in a business.  The “mark” can be extended to include a logo such as the “Pepsi” bottle that is synonymous with Pepsi, or the “Apple” that represents Apple and all its products.  A multitude of examples can be found.

How long has franchising existed?

Franchising has been around for at least 150 years.  Supposedly Singer Sewing Machine was the earliest example of franchising.  Books have been written, actually very interesting books, about the development of franchising.  Franchising has been used for nearly every product and service that you can think of:

  • Automobile Manufacturing (Ford & General Motors)
  • Real Estate (ERA, Remax, Century 21)
  • Fast Food (Subway & McDonald’s)
  • Tax Preparation (H&R Block)
  • Carpet Cleaning (ServiceMaster)
  • And so much more!

It would be much easier to think of a business that has NOT been franchised than to think of the thousands that have been.

In franchising, who owns what?

The franchisor owns the right to license the name or Marks.  The franchisee must be willing to pay for the use of those Marks.  This is known as “product” or “trade name” franchising.  A more complex form of franchising includes what is known as “business format” franchising.

Business Format franchising

In a business format franchise, the franchisor exercises additional control in the sense that they may be involved in such support services as site selection, training, advertising materials, marketing plans and more.  Many franchise systems are combination of trade name and business format models.

One reason to franchise:  Consistency

Generally speaking, the franchisee (often called the “zee”) offers for sale the marked products or services that have been developed by the franchisor (the “zor”).  This implies a consistent level of quality and service to consumers.  A quarter pounder with cheese should look and taste the same from coast to coast.  (Side note:  Successful, sophisticated franchisors will modify their products and services for either local or foreign preferences.)

Looking for a franchise?

Look no further than the franchising section of BizListPro.com.  We have some great offerings for new franchise opportunities and new ones are being posted regularly.  If you’re still not convinced a franchise is right for you, we also have hundreds of existing businesses for sale here at BizListPro.com

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