A franchise involves you using another company’s successful business model to create your own shop, restaurant, etc. Essentially, you buy the franchise and trade off the good name of the company you’ve bought into. For example, Subway – you’d find a suitable location, Subway would provide you with their livery, food products and use of trademark. You make money because customers are already familiar with Subway; so you have an instant customer base. Franchises are for a fixed period of time – from five to 35 years – and cover a certain location known as a ‘territory’.
Examples of franchise businesses:
-McDonalds
-Subway
-Most fast food restaurants
-Sears
-Department stores
Examples of franchise businesses:
-McDonalds
-Subway
-Most fast food restaurants
-Sears
-Department stores
Advantages- An established business
- A commonly known brand - Simpler business financing - Business relationships - Support and security - Less likely to fail |
Disadvantages- No full control
- Tied to suppliers - Risks from others - Franchise costs - Cut of profit |