What is a Franchise?

In simple terms a franchise is a license to an individual by an already established and successful brand for a fee to start the same business in an agreed territory under the franchisor’s terms and conditions, with all the necessary operational support to make the business successful. For the entrepreneurs it provides them independence to run their business with the support of a multinational business which has a proven track record.

Types of Franchise

1. Product Franchise
The manufacturer grants a franchisee the authority to distribute goods by the manufacturer and allows the owner to use the name and trademark owned by the manufacturer. The franchisee must pay a fee or purchase a minimum inventory of stock in return for these rights. Examples of Product Franchises include: Mobil, Goodyear, Baskin Robbins, and Ford Motor Company.

2. Retail Franchise
A company provides a franchisee with a proven method for operating a business using the name and trademark of the company. The company will usually provide a significant amount of assistance to the business owner in starting and managing the company. The franchisee pays a fee or royalty in return. Examples of Business Format Franchises include: McDonalds, Dunkin Donuts.

3. Manufacturing Franchise
These types of franchises provide an organization with the right to manufacture a product and sell it to the public, using the franchisor’s name and trademark. This type of franchise is found most often in the food and beverage industry, but can be applied to other industries. Examples of Manufacturing Franchises include: Coca-Cola.

4. Master Franchise Licensee
A Master Franchisee adopts completely all the original functions of a franchisor. A Master License could cover a region or a whole country. A Master License would only be awarded to experienced business persons capable of producing a comprehensive business and investment plan acceptable to the original franchisor. The master franchise holder can sell sub-franchises in the agreed territory.