FAQs About Franchising
If you've ever wondered how to start a franchise, where to find franchisees, how the franchisor/ franchisee relationship should work, or what to ask before purchasing a franchise, you've come to the right place. Below, we answer the most common questions prospective franchisees and franchisors have asked us over the years.
Once you've finished your research, you may be interested in:
What is a Franchise?
A franchise (or franchising) is a method of distributing products or services involving a franchisor, who establishes the brand’s trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system.
What Are Common Franchising Terms and Definitions?
• Business format franchise: This type of franchise includes not only a product, service and trademark, but also the complete method to conduct the business itself, such as the marketing plan and operations manuals.
What is a franchise fee?
In exchange for a franchise, the franchisee usually pays the franchisor an initial start-up fee and annual royalty fees or licensing fees depending on the language in the franchise agreement in order to use the franchisor's proprietary business knowledge, intellectual proper
What is a Franchisor?
A franchisor is a business or corporation that licenses the right to operate in its name and sell its products or services using the franchise’s
What is a Franchisee?
A franchisee licenses the right to do business under a franchisor’s brand using the franchisor’s operational processes.
What is the FTC Franchise Rule?
The FTC Franchise Rule is a federal regulation which requires franchisors to prepare an extensive disclosure document and give a copy of this document to any prospective franchise purchaser.
How Can I Tell If a Business Is a Franchise?
Many franchises have franchisee-operated locations as well as corporate-operated units, so it can be difficult to determine if a local business is a franchise at first glance.
What Are the Most Common Franchised Industries?
Franchises operate in virtually every sector you can imagine. In addition to a large presence in the restaurant and hotel sectors, the most commonly franchised industry categories include service-related fields such as:
Why Should I Support IFA Member Companies?
Companies that belong to IFA must meet certain membership requirements. They must have a satisfactory financial condition and comply with all applicable franchise laws. In addition, all members must agree to abide by the IFA Code of Ethics.
How to Get Started with Franchising
Am I Ready to Start My Own Business?
“Find something you love to do and you’ll never have to work a day in your life.” -Harvey Mackay
Is a franchise a good way to start your own business?
There are typically three paths to going into business for yourself: starting a new business, buying a new franchise, or purchasing an existing franchise. Each option carries pros and cons, which we have outlined below.
How Much Money Do I Need to Buy a Franchise?
Investment requirements for purchasing a franchise differ tremendously based on the industry and the type of business the franchise operates.
Is Franchising Right for You?
10 Key Questions to Ask....
What are the Advantages and Disadvantages of Owning a Franchise?
How Do I Franchise My Business?
Franchising your business can not only strengthen your company's brand recognition and reach, but it can also help secure its future. Franchising provides franchise business owners with an established product or service, which may already enjoy widespread brand-name recognition.
What is the best franchise to own?
The best franchises are those with proven franchise business models and strong support systems that provide high-quality products or
How Do I Fund My Franchise?
The sooner the better. It is usually a good idea to start figuring out how you will be funding your business venture as early in the process as you can. Some funding options take time and you don’t want to miss out on an opportunity. One of the most important aspects of opening a franchise is funding.
Am I Ready to Buy a Franchise? Three Questions to Ask Yourself
There are three main questions you should ask yourself:
Where Can I Find the Best Franchise Opportunities?
The International Franchise Association has the largest directory of available franchise opportunities online.
What Are the Risks of Buying a Franchise?
Like starting any business, buying a franchise involves risk. Although most franchisees are satisfied and successful, some do suffer financial losses. That’s why you must be particularly wary of any company that “guarantees” profit or certain success.
How to Evaluate a Franchise Opportunity
What Information Does a Franchise Disclosure Document (FDD) Contain?
The purpose of the Franchise Disclosure Document (FDD) is to provide prospective franchisees with information about the franchisor, the franchise system and the agreements they will need to sign so that they can make an informed decision.
What Should I Consider Before Buying a Franchise?
Among the points IFA recommends for investigation are:
What Should Franchisees Know about a Franchisor's Financials?
Financial statements represent the financial track record of your franchise and tell you how well positioned your franchisor will be for the future.
What Questions Should You Ask Before Purchasing a Franchise?
Before purchasing a franchise, make sure to ask the questions below to evaluate the potential franchise opportunity.
Evaluate the Strength of the Franchisor
What Criteria Should I Use When Evaluating a Franchise Opportunity?
Before purchasing a franchise, we recommend carefully considering the items in the eight categories below that will be critical to your success:
What Questions Should I Ask Franchisors When Evaluating a Franchise?
Overall Questions to ask the Franchisor:
What Questions Should I Ask Franchisees When Evaluating a Franchise?
Questions about the franchisor:
What Are the Most Important Items in the Franchise Disclosure Document (FDD)?
The International Franchise Association considers the six sections of the Franchise Disclosure Document to be critical pieces of information to help you evaluate a potential franchise for purchase:
Item 7: Costs
What are the Most Important Sections in the Franchise Agreement?
Franchise agreements vary between different franchises, but these seven areas should be addressed in every franchise agreement.
What Legal Information Should I Review When Considering a Franchise?
A good relationship between the franchisor and franchisee is critical for the success of both parties. Since franchising establishes a business relationship for years, the foundation must be carefully built by having a clear understanding of the franchise program.
Questions About Franchise Operations
Pros and Cons of the Pure-Play Franchisor E-Commerce Model
The pure-play franchisor model places responsibility for e-commerce licensing, setup, operations (including fulfillment), marketing and customer support squarely
Pros and Cons of the Pure-Play Franchisee E-Commerce Model
The pure-play franchisee model transfers the task of handling e-commerce operations to
Pros and Cons of the Shared Franchise E-commerce Model
The shared franchise e-commerce model is a variation of the pure-play franchisor model that considers the growing awareness and will of franchisees to be part of the internet enterprise while acknowledging the
Pros and Cons of the Distributed Franchise E-commerce Model
The distributed franchise e-commerce model strives to position franchisees as the primary beneficiaries of e-commerce success while maintaining a consistent service experience with a franchisor-con
What is a strategic alliance?
A strategic alliance is an arrangement between two franchisors to form a mutually beneficial business relationship while still retaining their independence. While similar, it is less binding and more flexible than a joint venture agreement, which would create an entirely new business between the two entities.
What is a Franchise Royalty Fee?
Franchise royalty fees are recurring fees paid by the franchisee to the franchisor in order to continue using the business name, branding, and more.
How Should Franchises Set Up Their E-Commerce?
Begin by defining your quantitative goals.
What is the best e-commerce model for a franchise?
Franchises typically approach e-commerce operations in one of four ways:
How Do I Make My Franchise Successful?
Making any business reach its full potential takes talent and hard work. If you've selected your franchise well, your franchisor will be able to help you avoid many of the mistakes new, independent start-up businesses make. Below, we've listed 10 keys for franchise success.
Where Can I Find Legal Support for Franchises?
The International Franchise Association maintains a franchise supplier directory that includes a legal category to help franchisees and franchisors identify attorneys with experience in franchising.