As a marketing and business strategy, franchising is one of the most popular choices available to aspiring small business owners.
Essentially, a franchise is an investment in a pre-existing marketing plan and brand. When a business owner “buys into a franchise,” he or she is actually entering a contract with the parent company that allows him or her access to the company's distribution system, national marketing schemes, and a well-established brand. In return, the parent company, or franchisor, retains the exclusive right to sell the franchise owner its products, marketing materials, and brand identity. It also retains the right to withdraw its approval for using that brand if the franchisee violates the contract.
“Buying” a brand
One common misconception about franchise businesses is that the business owner is “buying a franchise” from its parent company. In fact, the owner is investing in the parent company's image and brand.
The concept is relatively simple. The business owner gets to sell a product that is already known to be successful and has the added benefit of working within a pre-existing infrastructure. The parent company maintains control of its brand image, which gives it a certain amount of control over the actions of the franchise. In the end, however, all of the assets of the franchise belong to the owners.
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By Matthew Bendert
