A Primer on Franchising | Business Information

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A Primer on Franchising

Author: Jhoana Carla de Toro

The concept of franchising is no longer new to a lot of people. But, what is it exactly? Franchise has two meanings. First, it is a right granted by the owner of the business or the seller to others so that they can sell the same products in a specific territory. Franchise can also mean the contract granted by a chain to a person so that he or she can operate an outlet in a specific area. This contract grants a person non-exclusive rights and it also requires an initial fee. It is often stated on the contract that the parent company will supply the needed equipment, personnel training and promotional advertising.

Franchising is a very popular business method. As a matter of fact, it generates about $ 1 trillion dollars of revenue annually. Franchising started in the 1860s and it was begun by the Singer Sewing Machine Company. Singer allowed independent owner-operators to sell their line of equipment. Not long after, other businesses followed suit and that made the franchise business boom. Today, in the United States alone, there are more than 500,000 franchise outlets and it is expected to grow more this year.

How Franchising Works

The person who runs a franchise is called a ?franchisee?. He or she pays for the franchise from the ?franchisor?. A person who buys a franchise must follow stringent rules and guidelines set about by the franchisor. Most franchises also require royalty fee, up-front fee, renewal fee for the franchise and a one-time fee to the franchisor. The number of franchises cropping up everywhere is a testament to how popular franchising is.

Contrary to what most people think, there are various types of franchises, not just fast food chains like McDonald?s, Lenny?s, Sub Sandwiches, Little Caesar?s and many more. As a matter of fact, there are more than 120 business types which are actively franchised today including cleaning and maintenance, automotives, insurance and pet related services.

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About the Author

Jhoana Carla de Toro is a freelance writer and blogger who likes to write about finances, music, literature, movies, social issues and many more. She finds joy and solace in writing and reading and she would like to share her life experiences to people all over the world.

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