Franchising is a business relationship where a franchisor (a company or individual who owns the franchise system) grants a license to a franchisee (a company or person who contracts to use the franchise system) the right to use the franchisors brand and operating system for an initial fee (initial franchise fee). In return, the franchisee provides a share of the income back to the franchisor (a royalty). The license is contractual and is usually for a fixed period of time. The franchisor selects candidates to become strategic partners in implementing the business plan and selling products and services to the franchisor’s customers using the proven franchisor’s business model and/or their proprietary products. A franchise model has in place policies and procedures so as to create consistency from one franchise location to the other. As a growth strategy, it provides franchisors the ability to gain market share by increasing their points of distribution. Increased point of distribution results in greater exposure and brand awareness. Franchisors are able to grow and have committed individuals operating and driving the location. From a franchisee’s perspective, it allows the franchisee to get into business with support, a brand name, and a proven business model. This helps to reduce the risks involved with getting into the business. It has become a part of almost every industry. Although people most often think of fast food when they think of franchising, it is also found in retail, service, automotive, business services, real estate, and lodging. There are several things that one must understand about a franchise. You are not buying the franchise. Instead, you are acquiring a license to operate a franchise. You do not own the name, but instead, have a license to use the name. You do not own the business model, but instead, have the right to use the business model for a period of time. It is a little like being a tenant and renting. You don’t own the space you are renting, but instead, have the use of the space for a period of time. Uniformity is a fundamental principle to the success of a franchise. There must be consistency from franchise to franchise within a given business. By having the same product in similar outlets, with consistent levels of service, the franchise is able to build confidence in the mind of the customer and this drives people to the brand. Customers gravitate to what they know, what is familiar, and what they trust. The uniformity is created through operating standards and procedures that are clearly documented in operation manuals. Franchisees are required to follow an operating system and use the same suppliers of products, taking the same training. The system, suppliers, and training are all designed to create a consistent experience for the end user of the product or service and thus create an expectation and impression in the mind of the customer. The uniformity is enforced through a franchise license. This license gives you the right to use the brand and operating system. The license also comes with obligations, to follow the operating standards and systems, as clearly defined in the business model. If you fail to follow the standards, you may lose your license. With compliance to the system drives the market and enhances your investment. When you first look at a franchise agreement you may find it controlling and very one-sided in favor of the franchisor. This is normal and required to allow the franchisor to control the integrity of the brand. As a franchisee, you must understand that you simply can’t do what you want. You are required to conform. The success of the system as a whole to build a brand is dependent upon consistency. Although you can’t simply do what you want, strong franchise organizations value franchisees’ input and create advisory groups to provide feedback and input to the franchisor to assist in the strategic direction of the company. They view the franchisee and franchisor relationship as a partnership. A partnership in a strategic sense, not a legal sense. In franchising, it is not an equal partnership. The franchisor takes input but ultimately the franchisor has the final say. The franchisor acts as the senior partner in the strategic partnership. Franchisees are on the front lines and have strong knowledge of the needs of the customer. At McDonald’s, it was the franchisee’s input that led to the development of the Egg McMuffin and the McFish sandwich. Strong franchisors listen and value input from franchisees. Franchising provides numerous benefits. Benefits often include;