Franchises

A franchise allows the owner of a successful business to duplicate it in another location without having to raise capital themselves. A franchise can be bought by a sole proprietor, a partnership, or a corporation. Each independently owned franchise operates like a part of a large chain.

The purchase is a continuing agreement between the franchiser ( the company that originated the venture) and the franchisee ( the person buying the rights to copy the venture). The franchiser’s knowledge, image, success, manufacturing, marketing, and management techniques are all part of the agreement.

Franchisee’s are not allowed to run the business as they see fit. Franchisee’s must follow the policies, standards, product line, and procedures set forth by the franchiser. A Franchisee is required to pay royalties.

Each franchise uses the same trademark, equipment design, and operating procedures. Each franchise produces the same standardized product or service. Ex: Every Big Mac tastes the same at every McDonald’s.

Franchise Activity Choose one of the following franchises and determine the following: How much it costs to start/open a franchise; What are the ongoing fees or royalties; What requirements do potential franchisees need to meet in order to be considered?