Buying a Franchise or Business Package.
What do we mean by 'business package'?
There are some organisations which enable the budding entrepreneur
to start in business by providing the necessary equipment, expertise
or training to do so within a package. For example, one of our
offers all the equipment that you need to start a business manufacturing
garden ornaments. The package includes a number of moulds and
tools, the materials and a day's training to show you how to
'Business packages' are not 'franchises'.
What is a franchise?
The term 'franchising' covers a variety of arrangements in
which the owner of of a product, process, service or even just
a name (in the terms of a celebrity) allows someone else to
use it in exchange for some payment.
This rest of this page refers particularly to 'business format
It is a method of starting a business which minimizes risk by
using or emulating a tried and tested 'business formula'. A
contract is forged between 'the franchisor' - (the organisation
that supplies the franchise) and 'the franchisee' - (the party
that purchases the franchise).
The franchise package supplies most of the things that one needs
to launch the business successfully:- training, licence to use
franchise name, customer base, supplies and raw materials, equipment,
promotional material etc.
In addition to a set-up fee, the franchisor may charge an ongoing
fee based on the percentage of sales or profits of the business.
The key point is that it should be a proven business system
that is offered - not merely the right to sell a product or
Business format franchises generally fall into one of two
a 'job franchise' (in which the franchisees actually do
the work that provides the service to the customers)
a 'management franchise' (in which the franchisee is mainly
organising others to do this labour)
It is important to appreciate the difference between the two
categories because it will help you to find a franchise that
suits your skills.
In order to prevent franchisees within the same organisation
competing for the same customer base, territorial limits are
often stipulated within the franchise contract.
Also, the franchise contract may stipulate certain standards
regarding the quality of service or products supplied by the
franchisee, thus upholding the brand image.
When choices have to made, we tend to go for the 'familiar'.
Thus, a company can win business by 'branding' a product or
service to make it more familiar to potential customers.
A franchise opportunity enables you to buy into this brand image
and win custom that would otherwise go elsewhere.
Comments and Advice.
For many people franchising is an excellent way of starting
up in business. It is in the franchisor's long term interest
for you to succeed and so there is often continuing support
at hand, unlike buying an existing business
or starting from scratch on your own.
You may feel that the restrictions stipulated in a franchise
contract-with regards to your choice of suppliers, recruitment
policy or products- contradict the ethos of 'working for yourself'.
However, in the majority cases, these are in place to uphold
the franchise brand name and are part of a successful business
You may also find it painful to see a percentage of your hard
earned profits being diverted towards the franchisor. Again,
in most cases, the majority of this money is spent on advertising
/ marketing and benefits the group as a whole.
When considering a franchise, try to understand why they are
offering you the business in the first place. Very often, franchising
is an extremely quick low-risk method of expanding a successful
business across the world. The franchisee has the local knowledge
and takes on the majority of financial risk. In return the franchisor
is offering a successful business formula that has been proven
to work. But before you go ahead, ask yourself whether the support,
training, stock, experience and brand name justifies the investment
Watch out for companies that create franchises as an 'end product'.
Be aware that some companies use the term 'franchise' to describe
what is really a commission agency, network marketing opportunity
or other form of start-up.