What are Franchises
A franchise is an agreement that allows
you as a franchisee to buy the rights to operate your
business in the style of an existing business.
What do all of these famous brands all have in
Ok they are all franchises but
why should I buy a franchise and
not set up in business on my
Right well let me explain the
main features of a franchise
THE ADVANTAGES & DISADVANTAGES OF A FRANCHISE
If I want a pizza and I have
a choice between these
two restaurants which one
am I likely to use and why?
Oh goody I luv a quiz!
What’s the answer?
What’s the answer!?
Ok well you would be more likely to visit Domino’s Pizza
simply because it is a famous brand that you know and
This means that if you buy a franchise then you are
going to find it much easier to attract customers and
therefore you have a much lower risk of failure!
Hmm is that the only
benefit? I want to be my
Well just because you are part of
a franchise does not mean that
you cannot be your own boss!
You make all of the decisions
in the business and you can
employ your own staff.
You are responsible for
staffing, stock, quality,
customer service and the
day-to-day running of the
Sounds cool....like me!
But wait how much is
this going to cost me?
The cost of buying a franchise
depends upon how famous the
brand is that you are trading
under. Dominos Pizza will cost
you approx. £250,000.
Oh you will need to pay a fee
each year for using the brand
called a ROYALTY.
What about training and all
of the equipment,
advertising and products?
The Franchisor will provide you
with all of this so don’t panic. They
will also tell you what prices to
charge and layout some rules to
operating their franchise.
The advantage of a franchise
for the franchisor is that this
gives them a quick and
cheap means of expansion.
They will lay out rules though as to how to run the
business to make sure that you are not damaging their
brand’s reputation, so you do not have 100% control
over decisions but you have less risk of failure!
Will banks lend me the
money to buy a
Well they might not lend you the
entire amount but they are
more likely to lend to you as you
are less risky than setting up a
totally new business on your
So is a franchise right
for me then?
Well it really all depends upon
what you want to achieve in
business. If you want to have
total control over all business
decisions then a franchise is
wrong for you!
Also remember that you will need a lot of money to set
up as a franchise and this is no guarantee of success.
The franchisor will expect a slice of your annual profits
(royalty) and some franchises might not offer you all of
the training and support that you need.
Bob the Blob’s Question Time
1. What is meant by the term ‘royalty’?
2. Does a franchise owner have complete control?
3. Explain why a franchise is less likely to fail.
4. What are the main benefits of franchising?