When I ask people if they know what a franchise is, their answers are usually “branded” ones.
“Yeah, Joel…I know what a franchise is. McDonald’s is a franchise. Subway is a franchise. ”
Those answers are correct. But, I’m looking for deeper answers.
To get those, maybe I need to change my question. Could something like this work?
What’s The Textbook Definition Of A Franchise?
I’m pretty confident that if I asked people to define a franchise using that question, their answers would be a lot closer to what I was looking for.
I feel that knowledge is power. If you’re seriously thinking of becoming the owner of a franchise business someday, you should learn as much as you can about the business model, and how it’s supposed to work. It’s way too risky these days to go out and buy a franchise just because it’s “hot,” or because you’ve, “always wanted to own a sub shop.”
So, without further ado, here is the real definition of a franchise business. (Two definitions, actually.)
Here’s my non-legal definition;
The entrepreneur (the franchisor) has invented a business, and its model, and is looking to replicate it, by partnering with people that would like an opportunity to own their own business, while building equity for themselves and their families. The franchisor’s own money is invested up front, while company growth is leveraged by using other people’s money. (The franchisees.)
Here’s a the textbook-style definition;
A franchise typically involves the granting by one party (the franchisor) to another party (the franchisee) the right to carry on a particular name or trade mark, according to an identified system. Franchises are usually located within a territory or at one specific location, for an agreed upon term. The franchisee is granted a franchise license to use the franchise company’s trademarks, systems, signage, software, and other proprietary tools and systems in accordance with the guidelines set forth in the franchise contract.
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