What are the Various Factors Involving Franchising

Franchising is simply defined as the method of doing business where the licensed trademarks, systems and methods of doing business is being done by a franchisor from the franchisee in exchange for a royalty fee or a franchise management fee.

Franchising is another form of business by which a product, service or method of a franchisor is being obtained by a franchisee. In this business, the franchisor is expected to give assistance to the franchisee in organizing, training, merchandising, marketing and giving direction about the business for a certain amount.

There is usually a contractual agreement between the wholesaler or manufacturer or service sponsor called the franchisor, and the franchisee who is given the go signal to conduct the given form of business under an established name and pattern of business.
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Franchising is today’s most popular and fastest growing business economic model. Sharing of brand identification is allowed in this type of business relationship among people, and has been a proven way of doing business and being successful in marketing and distribution system. The fast food business is the immediate business that people think when they hear the word franchise. But this is now changed today as franchising has expanded to beyond burger and fried chicken restaurants. Nowadays, the franchise concept has spread to more than 70 various products and services like auto repair shops, children’s art centres, fitness clubs, law and consulting practices and other home based businesses. It is now claimed that the franchising model has become a big economic engine in the world, and it is a model that is giving an increased opportunities for firms and individual businessmen alike.
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There are several advantages in franchising. One advantage is that franchising is already a proven business to invest in. Next advantage is that in franchising, there is a faster start up of the business, the customer base is developed quicker, and you experience profitability also faster. The next advantage of franchising is that there is already a known and quantifiable proven formula. Another advantage of franchising is that there is an owner transition and training as well as a full control of a direction with strategies, plus with the ability to review thoroughly the past records and history of the company.

Considered as the biggest advantage of franchising is the reduced amount of risk an entrepreneur take for his or her investment. Because the franchise company can buy goods and supplies in bulk, you will be getting good deals in these areas, and you get the savings from this arrangement as well as the other franchise members. Because the product or service is known to the consumers, they feel comfortable in buying the product or service, and this is a big advantage in franchising.