Franchising refers to the business practice of leasing the right to utilize a particular company’s established business model and brand within a specific period of time. On the part of the franchiser, this can be considered as a good alternative, instead of constructing chain stores that will distribute the products. Franchising spares the company from the liability and the additional investments that is involved in building chains.
The success of the franchisor is influenced by the franchisees’ success. Because the franchisee has a direct share or stake in that particular business, it is also said that he actually receives a larger incentive compared to a direct employee. Basically, when it comes to the distribution of goods, the franchiser is the supplier who permits the franchisee or the operator to utilize the trademark of his supplier and facilitate the distribution of products. In exchange, the franchisee will have to pay the franchisor a certain amount.
Franchising is a common business strategy whose main objective is to obtain market share, as well as acquire and keep customers. In addition, franchising serves as a method for the distribution of a business’ services and products, which can satisfy the needs of the consumers.
Furthermore, this is also a system of business relationships that are interdependent and enables several people to share a brand identity, a proven method of operating a business, a successful distribution system, and an established marketing strategy. In other words, franchising is a form of strategic business alliance, which occurs among groups of individuals with a common goal and responsibilities. This common goal is to obtain more customers compared to other business competitors and dominate the market. In order to be successful in franchising, a franchisee must have a deep understanding of the business, and concentrate on collaborating with the managers and other franchisees in marketing the brand.