For the parent company, selling franchises provides a way to expand the market share quicker, and less expensively. There are several different types of business franchises, but here we will discuss the most common- business format franchises.

A business format franchise offers the franchisee the right to sell the parent company's goods or services, as well as it's business techniques. This differs slightly from other forms of franchises, such as distributorships which only allow the franchisee to sell the products or services, such as automobile dealerships.

Advantages of Owning a Franchise

The most appealing aspect of purchasing a franchise is usually the fact that most of the pre-opening work is done for you. When you purchase a business format franchise, you gain the privilege of not only being able to sell the parent companies products or services, but also the right to use their established business practices. These practices may include training programs, marketing strategies, trade secrets, etc.

Another advantage to purchasing some franchises is that the parent company may offer already well-recognized products or services. For example, buying a McDonalds restaurant will most likely give you a much larger starting customer base than if you were to open your own hamburger restaurant because people are already familiar with the company's product line.

Likewise, you may also benefit from the right to use the parent company's logo, storefront designs, and other unique elements. Well-recognized logos and storefronts provide the means of attracting greater numbers of customers.

Another advantage that may be attained through the purchase of a franchise is the use of any trademarks, copyrights, and/or patents that the parent company may hold.

Most franchisers also offer something that you may not find when trying to open a new business. The parent company will probably offer initial training for you and your staff, as well as ongoing support to help ensure a profitable business.

Requirements For Purchasing and Running a Franchise

Normally, the franchisee will pay an initial fee to acquire the franchise rights, as well as pay a percentage of gross sales to the parent company throughout the term of the contract.

The franchisee will be expected to meet any quality controls set forth by the parent company. This helps protect the parent company from allowing below-par products or services to be sold through their franchised stores.

Also, the franchisee will face some restrictions as to what can be sold from the store, as well as restrictions on how to operate the store. This ensures that the same products and services will be offered (and in the same manner) throughout the parent company's franchise network. Upon opening a new franchise, one may also have to meet specifications for business location and site appearance.