How Franchising Works

March 2, 2022

Understanding how franchising works might take some time. Plus, each franchise has their own way. But essentially, if you enter a franchise agreement you pay for using their business name and processes, and agree to use those things correctly in exchange for owning a business.

What Is Franchising?

To franchise something, the company allows buyers to essentially license the name, buy the tools at wholesale prices, and to market the business per the franchise documents. A franchise can be a bricks-and-mortar business, an online business, or even a particular process of doing business such as some types of marketing solutions.

Advantages of Franchising

The advantage of franchising is that if you do the right research and choose well, failure is less likely. The reason is that the business systems have been tested. All you must do is take the training and follow it. When you’re unsure, you’ll have people to talk to about ideas and ways to do better. Some studies show that a legitimate franchise has a 95 percent success rate.

Disadvantages of Franchising

While you’re considered an independent business, you’re still working for people who are like bosses. You’ve entered a legal agreement with them to run the business the way that they dictate that you run it. And due to this, your business relates to all the other franchises. So if one person does something that makes the news, it could affect your business negatively.

Franchising Fees

There are a lot of different fees outside of the charge for buying into the franchise, which is payable upon signing the contract. But then you’ll have ongoing fees for a product that you may or may not be required to buy from them. Plus, you will be responsible for royalties that may be as high as 12 percent of revenues. Don’t forget other costs such as build-out, lawyer fees, employees, and so forth.


Many people do not realize that most franchising buy-ins are for 5 or 10 years. It’s going to be up to you to resign from the franchise, which may require more fees. Plus, you will not be allowed to use your own business judgment when operating a franchise. You must follow the standard operating procedures given to you by your organization. You may even be limited about when you can sell the franchise to others, and who you can sell it to.

Selecting the Right Franchise for You

To select the right franchise for you, it’s important to understand your own skillset, interests, and even physical and mental capabilities before making your choice. You don’t need experience or business experience, but you do need the ability to do what the job entails. When choosing, be sure that you can really do this long term. For example, if you’re interested in health you might want to select a restaurant franchise like Fresh Healthy Café.

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One thing a lot of people don’t know is that owners don’t always use the term “franchise” to describe their business opportunity – even if that’s exactly what it is. A franchise is determined by a few actions such as association with a trademark, payment of a fee, following certain marketing plans and so forth.

For example, is really a franchise; they don’t call themselves that, but anytime someone teaches you a system, and you’re allowed to use the system and you pay a fee for using that system, it’s really a franchise.


There are a lot of businesses that you go to regularly that are franchises. For example, a super well-known franchise is McDonald’s. There are also some lesser-known franchises such as Budget Blinds and Primrose Schools. You may be surprised that a lot, if not most, of the businesses available for investment and you go to daily are franchises.

Budget Blinds –
Primrose Schools –

If you want to find a franchise that is right for you, the best thing you can do is narrow down the niche you want to work in and then locate at least two or three that seem to be within your budget. This is a great site to search franchise opportunities of all kinds:

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