The Business of Franchising

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The franchise business model is a hugely successful way to do business. Here, franchise expert Derek Cafferata gives us an overview of the business of franchising.

The Franchise Business Model

Franchising is a way for a business owner (a franchisor) to grow his or her business by recruiting others (a franchisee) to open other locations. By replicating the business, with products, services, branding, marketing and systems, a business owner can expand the business without having to do all the work by him- or herself. Others are responsible for owning and operating an individual franchise unit.

The benefits of franchising are two-fold. For the franchisor, it is a great way to grow and expand your business. For the franchisee, it is a great way to own your own business without starting from scratch.

As franchise expert Derek Cafferata, CEO and President of All State Franchise Finders says, “Franchising is best described as being in business for yourself, but not by yourself.”

The Franchisor

A franchisor is a business owner who has an established business and has chosen to grow the business through franchising. As a franchisor, you are responsible for setting out the structure of your particular franchise model with everything necessary to replicate the business, including branding, marketing, management, structure, training and development.

All the details of how a franchisee must set up, establish and manage a unit must be clearly laid out and a franchise document is signed between franchisor and franchisee.

Once a franchisor is ready to franchise the business, with all legal documents and business systems in place, he or she will then begin to recruit franchisees who are willing and able to replicate the business in a particular location.

“As a franchisor, your responsibility is not to grow the business yourself,” says Derek. “Instead, your responsibility is to support those who are growing the business for you.”

The Franchisee

The franchisee is the person who owns and operates a unit or number of units within a certain area. The franchisee is responsible for abiding by certain rules and regulations set out by the franchisor for the running of the business, ensuring branding, marketing, management and systems are adhered to.

In order to become a franchisee, and remain a franchisee, there are some costs. The standard costs to buy into a franchise includes an up-front franchise fee, which ranges from tens-of-thousands of dollars to several hundred thousand dollars, as well as ongoing royalty fees.

Franchise royalty fees may be paid as a fixed cost or as a percentage of the turnover or profit of a particular period, most commonly paid every month or every quarter.

One of the greatest benefits for a franchisee is that they are the owner and operator of their own business, but they have the support of a much wider network when it comes to branding, marketing, training, systems and business development.

“The franchisor/franchisee relationship is a mutually rewarding one,” says Derek. “The more successful each party is, the more successful both will be.”

Franchise Experts All State Franchise Finders

Derek Cafferata and his team at All State Franchise Finders are considered the leading franchise experts. With a wealth of knowledge and experience, All State Franchise Finders help franchisors and franchisees achieve their franchising dreams. For more information, please contact All State Franchise Finders on 1-800-544-2161 or visit allstateff.com today. All State Franchise Finders – Your Franchise Experts.