Franchise Article

Like most things in life, the art of franchising is not quite as complex as it may seem to newcomers. The franchise concept has been hugely successful in America and while franchising is still relatively new in the UK, it offers the most reasonable avenue to a thriving business venture with a success rate far greater than an independent operation.

At its most basic level, the principle is very straightforward. Essentially, a franchise agreement is a marriage between a franchisor and a franchisee, in which each party performs a specified duty to ensure the success of their brand. The franchisor is responsible for developing and continually refining the business' systems of operation, branding, investment, and overarching trajectory, the sum of which is purchased by the franchisee for localized use. The franchisee, on the other hand, takes the strategic work of the franchisor and serves as the professional executor of those systems in the local, regional, or national territory assigned to him. Generally, on an international level, this system of business is most used in the Food, Beverage & Hospitality; Retail; and Service Industries.

As simple as the definition of the franchise opportunity may in fact be, however, it is not the complete picture of the industry. In recent years, the success of the general idea of franchising has been so great that many new terms have come into existence to further describe the types of roles that franchisees play and the different relationships between franchisor and franchisee that are possible. These are some of the more prominent ones.

Single Unit or Multi-Unit Licence
Typically requiring a low investment, these will usually be acquired through a Master Franchisee already established in a country. If a Master is not in place, it is rare for a franchisor to sign such agreements as this brings direct responsibility for providing training and support for franchisees onto the franchisor, who may lack the local market knowledge required. There are exceptions, especially for single units located in internationalised locations such as major airports; this process is known as Direct Franchising.

Regional Master Licence
A fast growing method of international franchising where a country is divided into regions, for example the UK could be divided into seven regional territories, with each Regional Master Franchisee sub-franchising.

National Master Licence
In this case, the Master Franchisee takes control of an entire country and operates a policy of sub-franchising, although some corporate expansion may also take place, especially in establishing a pilot operation.

Regional Corporate Developer Licence
Again dividing a country into regional licenses, but with no ability to sub-franchise. Development of the territory is carried out entirely through the corporate investment of the Regional Corporate Developer.

National/Multi-National Corporate Developer
This arrangement is reserved for large corporate entities with the investment capital to fully exploit the market(s). There is usually an agreement with the franchisor to open 'x' number of outlets in 'y' years in order to maintain the exclusivity of the agreement.

For anyone interested, there is certainly a vast amount of further franchising information available, but these are the essentials of the franchising world as it pertains to franchising in the UK and internationally. Hopefully this list of basic terminology allays unreasonable worries about the franchising model and establishes groundwork upon which to learn more. As franchises spread further around the globe, not understanding the fundamentals of this business structure can only put you at a disadvantage in the marketplace. Having a deep grasp of these concepts, however, could very well put you in position for future business opportunities, which is precisely what nearly every businessman is looking for.