1. Definition: What Is a Franchise Business?
A franchise business is a business model where an individual (the franchisee) purchases the rights to operate a business under the branding, systems, and support of an established company (the franchisor). The franchisee pays an initial fee and ongoing royalties in exchange for using the franchisor’s proven business model and brand.
Examples:
- McDonald’s
- Subway
- Costa Coffee
- Anytime Fitness
2. How Franchising Works
In a franchise agreement:
- Franchisor provides: brand name, training, systems, and support
- Franchisee pays a fee to operate the business in a set territory
The franchisee runs the day-to-day operations but must follow the rules and standards set by the franchisor.
3. Types of Franchise Businesses
There are several types of franchise models, including:
- Product Distribution (e.g., car dealerships)
- Business Format Franchising (e.g., fast food chains)
- Management Franchises (e.g., cleaning or recruitment services)
- Home-Based or Mobile Franchises (e.g., pet grooming, tutoring)
Most UK franchises fall under the business format category.
4. Benefits of Owning a Franchise
Franchising offers multiple advantages:
- Established brand and customer base
- Proven business model
- Training and ongoing support
- Marketing assistance
- Easier access to financing
Benefit:
Lower risk than starting a business from scratch due to existing brand trust and systems.
5. Costs Involved in Buying a Franchise
Common costs include:
- Initial franchise fee (ranges from £5,000 to £250,000+)
- Set-up costs (equipment, premises, licenses)
- Ongoing royalty fees (a percentage of sales or flat monthly fee)
- Marketing contributions (shared advertising costs)
Always review the Franchise Disclosure Document (FDD) for a full breakdown.
6. Responsibilities of the Franchisee
Franchisees must:
- Follow the franchisor’s operational guidelines
- Maintain brand standards
- Hire and manage staff
- Handle local marketing (within guidelines)
- Report financials regularly to the franchisor
Success depends on local management and commitment to the brand values.
7. How to Choose the Right Franchise
When considering a franchise:
- Assess your interests and skills
- Review the franchisor’s history and financials
- Visit existing franchisees
- Consult a solicitor with franchise experience
- Evaluate demand in your local area
Trusted resources include the British Franchise Association (BFA) and franchise exhibitions.
Frequently Asked Questions
Is a franchise business the same as a company-owned branch?
No. A franchise is independently owned and operated by a franchisee, whereas company-owned branches are fully controlled by the parent company.
Do I need business experience to run a franchise?
Not always. Many franchises offer full training and support, making them accessible to first-time business owners.
Can I sell my franchise?
Yes, most franchise agreements allow for resale, often with franchisor approval and a transfer fee.
What is the average time to break even in a franchise?
It varies, but many franchises reach break-even within 12–24 months, depending on industry and location.
Is there legal protection for franchisees in the UK?
Franchising in the UK is not regulated by law, but the BFA provides standards and dispute resolution support.
Are franchises always profitable?
Not necessarily. Success depends on location, management, market conditions, and the strength of the brand.
Conclusion
So, what is a franchise business? It’s a way to run your own company using the name, systems, and support of an established brand. With the right research and commitment, franchising can offer a rewarding path to entrepreneurship with reduced risk and solid backing.