Simply put, a franchise is a successful business with more than one branch in operation. More specifically, a franchise is a series of small businesses, each independently owned and operated under the supervision of a central office.

Some famous franchises include McDonald’s and Starbucks. You can literally find these companies anywhere in the world. It would be impossible for one person to run and maintain all locations, so each is run by a local businessman or woman, called the franchisee. It is the franchisee’s job to make sure that specific location succeeds, and he or she will see most of the profit of such success (or, conversely, bear much of the burden of failure).

So far, a franchise sounds very much like opening your own business. There are, however, some substantial differences, the main one being that a franchise is a preexisting business. When you purchase a franchise, you are purchasing a name.

Usually, if the business is successful enough to be a franchise, that name is easily recognized. For example, if you purchase a McDonald’s, it’s very different from starting your own hamburger joint. Billions of people around the world recognize the brand and will visit your business because of that name.

 In other words, when you purchase a franchise, you are already closer to succeeding than you would be with your own business venture. Rather than starting from scratch with no product, no name, and no recognisability, you begin with a well-known name and product. This is a much safer starting place than ground zero. 

The Franchising Tree

 You can think of a franchise like a tree. The tree trunk is the original franchisor, or head office, of the franchise. This is where everything is established. The franchisor gets to decide how things are run in the company. For example, they can tell you what sort of product you offer, how it’s offered, and the like.

In a traditional business, the trunk would head straight up, with everyone directly connected to it. In a franchise, however, you begin to get branches taking off. These branches are still attached to the trunk -- still bound by its operating policies, and still receiving assistance and products from it. However, each exists separately from the trunk as well. Although each branch depends on the trunk to a certain extent, it is also its own entity.

Think of it this way: when you look at a tree, you can say, “This is a tree,” or you can say, “This part of the tree is the trunk, these are the branches, this is the bark, and these are the leaves.” Separate any one of those parts and it remains itself but ceases to be a tree.

A franchise works the same way. In order to remain a franchise, the branches must be connected to the trunk. However, they also exist independently.

So as a franchisee, you will receive from the trunk: 

·  Operating procedures you are expected to follow

·  Products and product standards

·  (Often) set pricing and promotional rates 

However, you are also independent, and you will be left alone to:

·  Manage your employees and customers

·  Decide how your business should be run

·  Make sure that policies are maintained properly

·  Promote and sell the product

 As you can see, while much of the legwork is taken care of for you, franchising still remains a busy, difficult, and ultimately rewarding opportunity.

 Why a Franchise?

 There are good and bad reasons to purchase a franchise. A successful franchise can bring you wealth, satisfaction, and financial independence. You’ll be your own boss, and that appeals to many people.

 If, however, the thought of a tax audit makes you break out in a cold sweat, you might want to rethink this whole running-your-own-business thing. In order to run a successful business -- franchise or otherwise -- you will have to deal with stressful situations. If the thought appalls you, you might be better off as a silent partner, or working in a more traditional setting.