1. Introduction to Franchising
Many entrepreneurs want to start a business but prefer to reduce risks. One option is franchising. But what exactly is franchising in business, and why is it so popular in 2025?
2. What Is Franchising in Business?
Franchising in business is an arrangement where a business (the franchisor) allows another person or company (the franchisee) to operate under its brand, using its products, services, and business model in exchange for fees or royalties.
In simple terms:
- The franchisor owns the brand and business system.
- The franchisee buys the right to use it and runs their own outlet.
3. How Franchising Works
- The franchisor licenses their brand, systems, and products.
- The franchisee pays an initial franchise fee to join.
- The franchisee also pays ongoing royalty fees (usually a % of sales).
- The franchisor provides training, support, and marketing.
- The franchisee operates the business following the franchisor’s rules.
4. Examples of Franchising in Business
- McDonald’s – Thousands of restaurants worldwide are franchised.
- Subway – Franchisees operate local sandwich shops.
- Domino’s Pizza – Franchise owners run outlets under the global brand.
- The Body Shop – Many international stores are run as franchises.
5. Advantages of Franchising
For the Franchisee
- Proven business model reduces risk.
- Strong brand recognition from the start.
- Training and support provided.
- Easier access to financing (banks trust established franchises).
For the Franchisor
- Expands the brand without owning every outlet.
- Gains steady royalty income.
- Increases market presence quickly.
6. Disadvantages of Franchising
For the Franchisee
- High initial investment and ongoing fees.
- Limited freedom—must follow franchisor’s rules.
- Risk if franchisor’s reputation suffers.
For the Franchisor
- Harder to maintain brand quality across many franchisees.
- Legal disputes may arise with franchisees.
7. Types of Franchising
- Product Distribution Franchise: Franchisee sells franchisor’s products (e.g., car dealerships).
- Business Format Franchise: Franchisee uses franchisor’s brand, systems, and processes (e.g., McDonald’s, Subway).
- Manufacturing Franchise: Franchisee produces and sells franchisor’s products under licence.
8. Is Franchising Right for You?
Franchising is best suited for entrepreneurs who:
- Want a lower-risk business model.
- Prefer guidance and support from an established brand.
- Are comfortable following set rules and processes.
It may not suit those who want full independence or to create a brand from scratch.
Frequently Asked Questions
Q1: What is franchising in simple words?
It’s when you run your own business using another company’s brand and systems.
Q2: How much does it cost to buy a franchise?
It varies—some small franchises start around £5,000, while big names like McDonald’s can cost £500,000+.
Q3: Do franchisees keep all profits?
No, they must pay royalties and fees to the franchisor.
Q4: Can a franchise fail?
Yes, although risk is lower, poor management or bad location can cause failure.
Q5: Is franchising the same as licensing?
No, licensing allows use of intellectual property, while franchising includes full business systems and support.
Q6: Can I sell my franchise?
Yes, most franchisors allow resale, but usually require approval.
Conclusion
So, what is franchising in business? It’s a way to run your own company using an established brand and proven system. For entrepreneurs in 2025, franchising offers lower risk, strong support, and access to loyal customers. While it requires investment and commitment, it remains one of the most reliable ways to succeed in business.