What Types of Businesses are Franchises
A franchise is not a term that can remain unheard of in this global world. All around you, you can see the entire city riddled with business places that are actually franchises and are operating as a local shop for a global level company. But most people still don’t know what types of businesses are franchises. Believe it or not franchising has been around since the ancient Chinese era when landlords used to lease out their lands to peasants for a certain amount of fee.
The modern-day business franchising is assumed to have started by Benjamin Franklin, who signed the first franchise agreement with Thomas Whitmarsh in 1731 to obtain legal permits for providing printing services in Charlestown, South Carolina. Since then, a lot of franchises have opened up and today, there are thousands of franchises spread across hundreds of industries and sectors. Now when you ask what type of businesses are franchises, then the answer will be almost every one of them. According to a report published by the U.S. government for the year 2018, the franchise industry directly or indirectly engaged and employed about 21 million U.S. citizens and generated an economic activity of a whooping $2.3 trillion. This shows the importance and present shares of franchise businesses in the U.S. economy. Franchising has greatly contributed towards the overall development of the US economy and has been established to be quite a lucrative region for people seeking both freedom and financial stability.
What is a Franchise?
A franchise is a business place that is operated by an individual or a group of people known as franchisee by using the brand name, trademark and business model of a well established big company known as a franchisor. In this type of business model, a legal and commercial relationship is maintained between the board of the big company (the franchisor) and the group of individuals using the brand name (the franchisee).
In simpler terms, the franchisee is given a legal license to make use of the franchisor’s brand value, trade name and operating systems. In return for the legal rights to use the franchisor’s business model and to be provided with requisite training, support and operational instructions, the franchisee has to pay a franchise fee (sometimes also known as a royalty) to the franchisor. The franchisee also has to sign a contract known as franchise agreement in which they have to agree to operate their business in consonance with the terms specified in the contract. Thus, a franchise can be thought of as acting as an individual branch of the big brand franchise company.
What Types of Businesses are Franchises | Which business are mostly franchises?
Mostly service providing businesses and product selling businesses make up the chunk of what types of businesses are franchises. For example, fast food joints like McDonald’s, KFC convenience stores like 7 Eleven and even a car dealership like Toyota are actually franchises and operate under their respective parent companies.
Although any company can become a franchisor and sell its business as a franchise, when we think of what types of businesses are franchises, we can conveniently say that these include mostly places which give specific services to customers.