Business & Executive

Everything You Need To Know About Franchise Business

By Harshal Katre | Apr 6, 2020
Harshal Katre

Starting a new business is one of the toughest decisions you can every make. First, you need to find a good idea, then build a plan for marketing, branding, sales, hiring, etc. Then, you need to work on the product strategy and finally, raise capital to execute your plans.

Sounds like a lot of work.. right? This is where Franchise Business can help you.

In this article, I will cover what is Franchise Business, how it works, what do you need to start a Franchise and much more. Let’s dive in to see how you can benefit from Franchise Business opportunity and how good this is as compared to starting a business on your own.

What Is A Franchise Business

A business system in which private group of individuals is sold the rights of business logo, model, and the name of a much larger company, usually an MNC or Multinational Company by the owners or franchisors to run it in a different location is called as Franchisee Business. In simple terms, Franchise business is the extension of an existing successful business. It’s executed in an exactly similar way in which parent business works.

These private operators are called as franchisees. The relationship between the owner and seller is contractual. There are a lot of common examples of franchise business around us. For example, Macdonald’s, Subway, Cafe Coffee Day, Starbucks, Dominos, and Pizza Hut etc.

Process Of Setting Up A Franchise Business:

  • There is an initial fee for buying rights to the business, methods, equipment, marketing techniques etc. which the franchisee has to pay.
  • Once you buy the rights to the tested and the proven business system, you also get the access to trademarked things of the brand. For example slogans, brand name, logos etc.
  • In addition to these proprietary rights, the franchise might also be given a specific territory for the selling of the franchisor’s services.
  • Not only this, the time period for which the contract is going to be intact would also be specified in the agreement.
  • Generally, the tenure of the agreement is around 5- 10 years. Also, most of the times the right to renew the time period is also available.
  • As soon as the business starts off, there is then payment of ongoing royalty payment which might be on the annual basis or it depends.
  • The amount of royalty payment is calculated on the basis of total sales made by that franchise retail outlet.
  • Thus, a contract would be signed between franchisee and franchisor.
  • Points to remember:

  • The franchisee must be aware of the fact that he/she has not bought the rights to products of the franchisor but he/she has just bought the rights to use the name of an already successful brand for selling of the products.
  • The methods of the proven business system would remain same.
  • The methods involved in the process, the uniforms, the pricing etc. everything is going to be the same as the actual business model.
  • It is just going to be an outlet in the same city or in a different city with exactly the same representation of the already tested business operation.
  • In order to be more clear about the purchasing of the franchise, or to finalize the decisions, you can get in touch with the professional organizations that deal only with these type of things. Some of the companies are mentioned in later part of this article.
  • Pros And Cons Of The Franchisee Business

    It is very important to understand the advantages and disadvantages of franchise business before buying the franchise business rights.


  • Risk – The biggest advantage of owning a franchise business is investing into a business which is already tested and proven. The probability of the risk regarding the profits and growth of the business is likely to be very low.

  • Training – When you are buying the rights to the franchise business, you also get the advantage to get trained with the technology the proven business is already using, so that you get hands-on training on the methodologies of the already tested business system.

  • Marketing Strategy – There are a number of marketing techniques which are required in order to run a business. Franchisor’s already working business strategies and advertising pamphlets would definitely provide you with the push and grow off the business quickly.

  • Support – There are all kinds of support provided by the Franchisor to the franchisee. Not only franchisors would provide support through the technologies and methods they use, in the case of support is required in resourcing a good location, franchisors are going to lend support in that context as well. The importance of a good location is realized in terms of profits which would be shared not only the franchise alone but franchisor as well.

  • Connections and links – There would be another franchise who might have experienced the same troubles you might are experiencing. Of course, by discussing and sharing out your problems with other franchise

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