What is a franchise?

Despite franchising being worth over £15bn to the UK economy many people do not understand what a franchise is or what sort of businesses operate as franchises, so what is a franchise?

There are several forms of franchising including using franchising to distribute films, music and games but for the purposes of this article we will focus on what is called business format franchising. Business format franchising is when franchise documentation, agreements and training is used to replicate an already trading and successful business. Some of the many documents used for franchising a business include;

  • Franchisor (the business owner) business plan.
  • Franchisee (the person running the local franchise) business plan.
  • Franchise agreement – agreement between both parties on how each will operate and agreement of what will be paid to the Franchisor and detailing each others obligations.
  • Franchise prospectus – Sales & marketing document used by the franchisor to recruit franchisees.
  • Operating manual – The document which explains how a Franchisee will create/start their business and all day to day operations of running the business.
  • Training manual – Used by the Franchisor to train each franchisee to understand their obligations as detailed in the operating manual.

So what kind of businesses can operate as a franchise? Provided the business operating method can be transferred and the new local market is the same as the existing local area any business can be replicated using a business format franchise, these could include;

  • Automotive – examples of this could be alloy wheel & smart repair businesses, scratch removal and dent removal franchises.
  • Home based franchises – This could be anything from B2B sales, finance, consulting, internet services and is an extremely fast growing area with many people seeking improved work/life balance.
  • Recruitment – Many recruitment franchises covering sectors such as hotel & hospitality, domestic care & nursing staff.
  • Food & catering – Everyone thinks burgers and fast food but there are many food franchises including corporate catering franchises, pizza franchises, Chinese & Indian food franchises and many mobile catering low cost franchises.
  • Hotel – Some of the largest global hotel brands are franchises and have used this for decades to grow their brands without acquisition of properties.
  • Business advice & consulting – Everything from cost reduction, accountancy & business coaching is provided with these sorts of franchises.

Hopefully now you will be able to see the massive impact franchising has to the UK economy, helping assist new small business start-ups and providing valuable services to your local community.

By Joel Bissitt, Franchise UK