"An agreement whereby a business (franchisor), licenses another business (the franchisee) to trade using their branding, business model and a number of other assets, whilst also supplying additional support and guidance as part of the package."


Considering a Franchise

A popular way of getting into business is to purchase a franchise...

  • A franchise can give you all the benefits of an existing brand and infrastructure, training and support
  • You retain most of the profits and run the business as your own.

The terms of the franchise will be set by the Franchiser as part of the Franchise set up process.  

Business Model

The type of business model can be any of the others such as: 

  • sole trader, 
  • partnership,
  • limited company

How a Franchise Operates

There are two main ways that a franchise can operate, either a business format or product distribution.

Business Format
Business format franchises are the most common form of franchise.

They not only allow the use a franchisor’s product, service and trademark in return for a payment, but also access to the complete method to conduct the business itself, such as the marketing plan and operations manuals.

  • Franchisors will provide comprehensive start-up training and support
  • Most will provide an ongoing training facility for the franchisee and staff to expand their skills.
  • There can be a significant cost saving as outsourced training is usually very expensive. 

Product Distribution
A product distribution franchise allows you to sell the franchisor’s products.  

The franchisor licenses its trademark and logo to the franchisee but typically does not provide them with an entire system for running their business. 

The industries where you most often find this type of franchising are:

  • Soft drink distributors, 
  • Automobile dealers,
  • Petrol stations
  • Selling from home products e.g. cosmetics.
With a product distribution franchise, you are buying into an existing brand and market. 

  • This cuts out much of the initial market research and brand-building that a new business usually requires.
  • The franchisor has vast experience of the market and the products or services
  • You will have access to a tried and tested business formula, a roadmap to success which will show you each step you need to take to achieve your business goals.
  • You will have the support of other franchise owners, you may also have exclusive territory rights and will not therefore be in competition with each other.
  • Your franchisor will undertake market research and intelligence to keep you informed of the latest developments in the marketplace.


  • An established franchise is a safer business proposition than a brand-new business, so you may find it easier to raise the required finance from your bank or other lending institution.
  • You can own your own business but with support.
  • Associating with proven products and methods.


  • You will have little flexibility for things like brand or products, as those are chosen by the franchisor based on their business formula. You might find this inflexibility frustrating, so if you are the independent type, a franchise might not be for you
  • Strategic business decisions are out of your control, which could lead to financial risks. If the franchisor decides to take the business model in a different direction to the market, or take a risk on a new product or service, you could end up losing out.
  • Franchises can be expensive. You will have to pay a fixed fee for the franchise plus a regular fee or percentage of profits.
  • You may even be forced to purchase your stock from a specific supplier at a greater cost than elsewhere.
  • You will also need to pay your everyday costs like wages.

A bit of friendly advice:

  • Consult an accountant and find out exactly what your business expenses will be before committing.
  • Ensure you do your homework and research every aspect of your potential franchise thoroughly
  • Talk to existing franchise owners.
  • We are here to help!.

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