The Essentials of Franchising Explained

For people who have trouble understanding economic discourse, as many of us do, franchising is a term we’ve heard, but don’t exactly understand. And for those of us who aren’t super finance savvy, understanding franchising opens up a unique opportunity that you’ve maybe never considered for you and your family’s future before. Once you finish this article, you might even change your whole life plan, so read on with an open mind. Let’s dive in: what is franchising?

What Does It Mean To Invest In A Franchise?

In short, franchising is expanding a brand. It begins with a relationship between a company, known as a franchisor, and the franchisee, who virtually could be anyone with a solid credit score and interest in business. To be a franchisee, you don’t need a special business degree or really any prior experience running a business. What you do need is access to investable money, integrity, and the open-minded desire to learn either a familiar or a brand new business.

Choosing A Franchisor

In this business relationship, the franchisee (you) chooses a reputable franchisor to partner with and invest in. With GeoMetrx & our partners at Atlas Franchise Advisors, we act as your guide throughout this whole process, from choosing a franchisor to securing funding. This franchisor could be any business interested in expanding to new locations. Companies like Wendy’s, Junk King, and Great Clips are all examples of franchisors who have multiple locations where people can buy their products and services. As the franchisee, it’s your job to do research on the companies you’re looking to partner with. It’s important to consider the company’s reputation, franchisee qualification requirements, and fees. When finding you a match, it’s our goal for you to find the business partner that will bring you the most fulfillment and success. 

You Get What You Pay For

Once you’ve chosen a franchisor, the franchisee pays an initial franchise fee, which varies depending on the franchisor. For some companies, this may be as little as $5,000 or much as $100,000+ with the average being around $35,000. This franchise fee is required by the Federal Trade Commission, and this is what legally begins your franchising relationship. What you purchase with the franchise fee is essentially the brand of the company. You receive the rights to use the brand name, the brand’s marketing strategies, the brand’s business model and processes, and to sell the brand’s products or services. 

You also receive business allies from your franchisor. They provide business knowledge, strategies, and expertise along with other tools that come from the franchisor’s history of success. Examples of these other benefits could be discounts on equipment, lease negotiations, trainings or education, and invitations to corporate retreats or think tanks. With all of these proven benefits, there is much less risk that your business will fail. This is why many people choose to franchise instead of starting their own business from scratch. As your business grows and sees more and more success, there are also royalties that you pay the franchisor. These are usually annual royalties that average between 4%-12% and help pay for continued franchisor support. 

Investing In A Franchise: The Career Alternative You Never Considered

Franchising is an alternative route for aspiring business owners who don’t yet have the resources or experience to start their own from scratch. Investing in a franchise could be a promising detour for aspiring small business owners. Gathering experience working under a proven business model and then selling the franchise back to the franchisor or another franchisee to start your own business could be the encouraging start to the rest of your career. Investing also provides a new and exciting opportunity for people who currently find no satisfaction in their everyday job working for someone else and are looking for something new. Franchising provides business experience and, in many cases, further training and education. In some ways, investing in a franchise could be a more suitable alternative to pursuing a business degree at a university. 

Learn More At GeoMetrx

To further explore franchising as an opportunity for you and your family, check out our other educational blog posts down below. Get started with our free offer of a customized Franchise Opportunity Report, which gives you demographic insights into which franchises would thrive in the metro area of your choosing. We also offer free assistance in interpreting your report as a no-obligation video meeting with one of our team members. Don’t forget to follow us on Instagram, TikTok, & Facebook!