What does Franchise mean in marketing terminology?


A franchise is a business model which allows the franchisor (the business owner who holds the ‘franchise’) to let others, the franchisees, to use their business model, brand, trademark and commercial symbol. A franchisor grants a licence to the franchisee (the operator) to operate a business that uses the franchisor’s product or service, business model, trademark and other commercial symbols.

The main benefits of franchising are that it gives the franchisor access to an already established network of partners and customers, provides a means of quickly creating a brand and products, and having the advantage of a trusted partner in the marketplace. Franchising enables franchisors to expand their business and create a larger footprint in the marketplace.

There are several different types of franchising available. These include, but are not limited to, master franchising, area development franchising, and business format franchising.

Master franchising is the type of franchising primarily used outside the United States. It is the franchising of a master franchisor's business model, trademarks and other commercial symbols to a local (or several) franchisor(s). This arrangement allows the master franchisor to expand into new markets while also providing the local franchisor with the opportunity to build their own business.

Area development franchising is when a franchisor agrees to establish several franchises at once in a given geographic area. This is done through a contract between the franchisor and the area developer, who agrees to operate multiple franchises within a designated area. It usually involves an upfront investment from the area developer, as well as ongoing fees to the franchisor.

Business format franchising is when a franchisor grants a licence to a franchisee that entitles the franchisee to operate their own business. This type of franchising usually involves an upfront franchising fee, as well as royalties and other fees from the franchisee. The franchisor agrees to provide the franchisee with the use of their business model, trademarks, or other commercial symbols.

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In order to become successful in franchising, there are some key guidelines and best practices that should be followed.

Firstly, it is important to understand the different types of franchising. Research should be done to ensure that the right type of franchise is chosen, as well as any local regulations that may be applicable.

Secondly, it is essential that the franchisor has a good understanding of the marketplace and the competition. It is also critical to understand the operational system, marketing plans and other legal obligations that are associated with franchising.

Thirdly, it is highly advisable to create a business plan to ensure a successful approach to franchising. This should include a budget and a strategy for franchisees, as well as a monitoring system for their performance.

Lastly, it is important to develop an effective franchise network. This network should be composed of both the franchisor and the local franchisees. It should be coordinated from a single control point, making sure that all franchisees adhere to the same standards and will be equally responsible for their performance.

By following these general guidelines and best practices, franchising can be a successful and profitable business venture for both the franchisor and the franchisee.