1. What Is a Business Franchise?
A business franchise is a model where an individual (the franchisee) buys the rights to operate a business under the name, brand, and system of an established company (the franchisor). In return, the franchisee pays fees and royalties, while benefiting from training, support, and brand recognition.
2. How Does a Business Franchise Work?
- The franchisor owns the brand, products, and business model.
- The franchisee pays an initial franchise fee to join.
- Ongoing royalties (usually a percentage of sales) are paid to the franchisor.
- The franchisee runs the business day-to-day, following the franchisor’s system.
Example: Running a McDonald’s outlet under their global brand while paying fees and following company rules.
3. Types of Business Franchises
- Product Distribution Franchise – Franchisee sells franchisor’s products (e.g., car dealerships).
- Business Format Franchise – Franchisee adopts the franchisor’s full system, brand, and operations (e.g., fast food outlets).
- Management Franchise – Franchisee manages staff and operations but doesn’t deliver services directly (e.g., B2B services).
- Investment Franchise – Large-scale operations with high investment, often multiple units.
- Conversion Franchise – Independent businesses join a franchise network for brand recognition.
4. Costs of a Business Franchise
- Initial franchise fee – £5,000–£250,000 depending on brand.
- Royalty fees – Ongoing percentage of turnover (typically 5–10%).
- Marketing fees – Contributions to national or regional advertising.
- Setup costs – Equipment, premises, staff, and stock.
5. Advantages of a Business Franchise
- Operate under an established brand
- Lower risk compared to starting from scratch
- Training and support from the franchisor
- Easier to secure funding (banks favour franchises)
- National advertising and marketing campaigns
6. Disadvantages of a Business Franchise
- High upfront and ongoing costs
- Limited flexibility (must follow franchisor’s rules)
- Profits are reduced by royalty and marketing fees
- Risk tied to franchisor reputation (bad publicity affects all franchisees)
- Long-term contracts can be restrictive
7. Is a Business Franchise Right for You?
A franchise suits entrepreneurs who want to run a business with:
- A proven business model
- Ongoing training and support
- Reduced risk compared to starting independently
It may not suit those who want:
- Full independence
- Freedom to innovate outside strict business systems
Frequently Asked Questions
1. What is a business franchise in simple terms?
It’s when you buy the rights to run a business under an existing brand’s name and system.
2. Do franchises make money?
Yes, many do, but profitability depends on the brand, location, and management.
3. How much does a franchise cost in the UK?
Costs range from £5,000 for small franchises to £250,000+ for big brands.
4. What are the most popular franchises in the UK?
McDonald’s, Subway, Costa Coffee, and Domino’s are well-known examples.
5. Do I need experience to buy a franchise?
Not always – most franchisors provide full training and support.
6. Can I sell my franchise later?
Yes, many franchise agreements allow resale, subject to franchisor approval.
Conclusion
So, what is a business franchise? It’s a way to run your own business with the backing of an established brand and system. While there are costs and restrictions, franchises offer lower risk, training, and credibility—making them a strong option for aspiring entrepreneurs who want guidance and support.