A franchise is a business model that allows individuals (franchisees) to own and operate their own business using the brand, products ,services and support of an established company (the franchisor).

The franchisee pays fees and royalties to the franchisor in exchange of the right to use their proven business model, trademarks and ongoing assistance.

Here's how a franchise typically works:

Franchisor/franchisee relationship

The franchisor is the established company that has developed a successful business concept, brand and operating system. The franchisee is an individual or entity that purchases the rights to operate a business using the franchisor's brand and methods.

 Franchisee Fee

The franchisee pays an intial franchise fee to the franchisor.

This fee covers the right to use the franchisor's brand, business model and support services.  

Royalties

In addition to the intial fee, franchisees usually pay ongoing royalties and or a monthly management fee. The fees being a percentage of their gross revenue or a fixed amount. These fees cover the ongoing support and services provided by the franchisor, including training and updates to the business model.

 Training and Support

Franchisors provide comprehensive training to franchisees to ensure they understand the business model. operations and customer service standards.  This training can cover everything from product knowledge to marketing strategies.

 Operation Manual

Franchisees receive an operations manual that outlines all aspects of running the business, including procedures, policies and quality standards. This manual helps maintain consistency across all franchises.

Marketing and Branding

Franchisors often handle national or regional marketing efforts and provide marketing materials to franchisees.  This ensures a consistent brand image and message across all franchise locations.

 Franchise Agreement

Franchisees sign a legally binding franchise agreement that outlines the terms and conditions of the franchise relationship.  This agreement covers aspects such as fees, royalties, territory rights, operating standards and dispute resolution.

 Territorial Rights

Franchisees are often granted exclusive or semi-exclusive territorial rights, which means that no other franchise locations of the same brand can operate within a certain geographically area.

Business Independence

While franchisees operate under the franchisor's brand and follow its business model, they still have some degree of independence in running their individual businesses.

Renewal and Exit

Franchise agreements are typically valid for a certain number of years after which franchisees may have the option to renew.  If a franchisee decides  to exit the franchise, there are usually guidelines for selling the business to an approved buyer.

Franchising can offer entrepreneurs a proven business concept with established brand recognition and on-going support, while franchisors can expand their brand and revenue through the efforts of motivated and invested franchisees.  However, it's important for both parties to carefully review the franchise agreement and understand their rights and responsibilities before entering into the relationship.