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What is Franchising?

Want to be your own boss, but not willing to take on the risk of starting your own business from scratch? Franchising can be a great alternative if you want to have some guidance in the start-up phase of the business.

What is Franchising?

A franchise is a business model that involves one business owner licensing trademarks and methods to an independent entrepreneur. Sometimes, franchises are referred to as chains.

There are two primary forms of franchising:

  • Product/trade name franchising

Franchisor owns the right to the name or trademark and sells that right to a franchisee

  • Business format franchising

Franchisor and franchisee have an ongoing relationship, and the franchisor often provides a full range of services, including site selection, training, product supply, marketing plans and even assistance in obtaining financing

Before Investing in a Franchise

Before you decide to franchise, you need to do your research. You could lose a significant amount of money if you do not investigate a business carefully before you buy. By law, franchise sellers must disclose certain information about their business to potential buyers. Make sure you get all the information you need first before entering into this form of business.

To learn more about franchising opportunities, visit Federal Trade Commission Bureau of Consumer Protection.

The decision to purchase a franchise involves many factors. To help you explore if franchising is right for you, consider the following questions:

Do you know how much you can invest?

What are your abilities?

What are your goals?

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