If you are new to franchising, you may find this page helpful. While there are several excellent books on the subject, this page summarized some of the key features and benefits of franchising versus starting an independent business.

What is the difference between a “franchise” and any other business opportunity?
Both franchises and business opportunities (or partnerships) can function in similar ways. First, both can allow the use of certain trademarks, patents or processes. Second, they both may offer a certain level of support to their businesses. However, franchises tend to give more support in return for more control over the franchisee. In addition to these differences, there are important legal distinctions. (1) Franchises will collect royalties on sales and may also collect advertising fees in addition to royalties. (2) All franchises must have a Franchise Agreement, or UFOC. This document will spell out all of the rules, terms, timeframe and conditions of the relationship.

What is franchising?
Franchising is simply a way of conducting business. Instead of an independent business attempting to sell products or services on its own, the franchisor offers the franchisee an established brand name, operating methods and marketing support. For this, the franchisee must pay start up fees in addition to ongoing operational fees (royalties) and other expenses.

How does a franchisor make money?
Franchisors make money in a few distinct ways. First, in order to purchase a franchise, the franchisee must pay an up front fee. This will cover many (if not all) of the expenses to get in business, including equipment, training, marketing and/or inventory as well as a profit for the franchisor. Second, the franchisor receives ongoing payments from each of its franchisees in the form of royalty payments. These payments are usually calculated as a percentage of monthly sales with a minimum amount due. Third, many franchisors will sell the franchisees supplies and equipment required to stay in business.

How common is franchising?
Franchises account for more than 40 percent of all business sales in the United States (and a healthy percentage worldwide – in fact, franchise business models are growing quickly outside of the US). In 2000, there were more than 300,000 franchised small businesses in over 60 industries.

Why should I consider a franchise versus starting my own business?
The concept behind the franchise is simple: you are purchasing the right to operate a proven, successful business – all you need do is implement it. While that track record does not guarantee success, the statistics are in the franchisee’s favor. Nearly 80 percent of all new independent start-up businesses fail in their first year. The rate is significantly lower for franchise entrepreneurs.