admin | 
01 31st, 2008| 
Many successful businesses look for ways to increase their presence away from their primary business location, but building new outlets can be an expensive proposition for many small businesses. They have the have the capital to invest into new locations as well as the trained people to operate them. Some companies, those with a proven business model are turning to franchising to help increase the number of their locations as well as to offset to cost of adding a new location.
Essentially, the franchisor, the owner of the business, maintains all aspects of the business in regards to ownership of the name, any trademarks and the policies and procedures they have established in building their business. The franchisor has developed and proven their business approach for their particular industry and are looking for new business partners to share in the brand’s growth. The fess charged to buy a franchised business, in addition to granting the franchisee the license to use their name and operate an identical business model, is that the franchise owner has a vested interest in seeing the outlet succeed.
The franchisor can be viewed as an umbrella over several different businesses represented by the number of franchised outlets they have sold. They do not sell any rights to the business, only the rights to use all of the trademarks as well as licensed merchandise that are unique to the business brand. The franchisee cannot change the product mix within the outlet, nor can they bring new merchandise or other products that are not part of the business’s original business model.
Many franchisees do not understand that when they buy into a business they do own the business outright, rather they own the right to use everything about the business. While franchise owners can earn a monthly salary while operating the business, with many franchises it can take from two to five years before their investment begins to show a profit from their initial investment. Most franchises will also require a continuing fee, typically a percentage of monthly income for support from the main company.
The franchisor has to fully train new franchise owners in how their business plan is to be operated so that no two outlets are operated different. Each new outlet should be considered a duplicate of the original and not a separate free-standing entity. The franchisor benefits by having their brand more widely known and the income from the new location will add to the overall health of the umbrella company.