What is a Franchise?

Franchising in business works in two ways: A business can either be a Franchise or Franchisee which will be explained later. It is a term that perhaps we subconsciously come across in our lives without knowing what it truly means.

The Call of Duty Franchise
One of the best known franchises is the Call of Duty first person shooter series which has been a global success. This was helped by the fact that different games were produced by different firms. For example Treyarch was instrumental in developing "World at War" whereas Infinity Ward was responsible for the Modern Warfare sub-series. This is an example of firms such as developers buying into the Call of Duty brand name and this allows them to produce games under the well established Call of Duty brand which of course has many benefits.

The benefits
It is easier to explain these benefits when talking in terms of the Fast Food market. Providing you had sufficient capital, you could buy a franchise from leading companies such as Subway and McDonald's tomorrow if you desired. This means that you become a franchisee of that company and are entitled to trade under the Subway or McDonald's brand name. Although initially expensive buying a franchise of a well established brand - and one which has a good reputation- will mean that marketing and drawing in customers  is a lot easier. Put it this way: Would you rather buy a roll from "Wareham Subs Ltd." or the local Subway franchise? Most people will go for Subway because they know it is successful and they don't need to risk their own cash on a new sandwich company.

The Process

So, when you buy a franchise you should expect to be invited to a training course because large fast food companies want consistency of service across all of their outlets and do not want a franchisee damaging their hard-earned reputation over the years. Simultaneously the company will send their approved tradesmen to fit your premises with the signs, grills and furniture that is found across all outlets nationwide to further add to the consistency of operations so your shop doesn't look merely like another independent food outlet. 

However the only drawback is that you have to make payments to the franchiser in "royalties" which is a percentage of your outlet's profits which go to HQ. Also a small percentage is paid into the national advertising budget (to produce the TV commercials etc.) but this is likely to be beneficial to all outlets though.

In the case of Subway it is reported that 70% of its franchisees go on to buy a second outlet under the Subway brand so it is clear that maybe a franchise is a smart idea.

Sam Wareham