What Is A Franchise?

A franchise is a right or licence granted to an individual or business, known as the franchisee, to market the goods or services of a brand owner, or franchisor, using its trademark within a certain geographical territory or location. The most common arrangement in the UK and Ireland is business format franchising, which covers not just the brand name, but provides a turnkey system for conducting business, including site selection, showroom layout, operating methods, marketing strategy, staff training and preferred suppliers.

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Franchises are a highly popular and successful format for starting up a business, especially if you wish to operate in a competitive market sector like home improvements. One of the major advantages of investing in a franchise comes from trading under an established brand name, rather than spending additional resources on building name awareness amongst consumers.

In the modern business era, franchising has emerged as an integral part of the commercial landscape. It is estimated that franchise businesses are responsible for over 40% of all retail sales in the United States, including many of the world’s best known brands, and in the UK there are around 40,000 franchised units, contributing £14 billion to the nation’s GDP.

The concept of granting franchises was born in the middle of the 19th century and blossomed post-World War II in the 1950’s and 1960’s, with fast food, hotel, laundry, dry cleaning and car rental franchises emerging on every high street. Today, the franchising model continues to evolve, with multi-unit franchising emerging over the last decade, as franchisees choose to no longer operate single, standalone businesses, but open up several franchise units.

To find out why more people are buying franchises click here. For a definition of common franchising terms, here is a brief glossary.