Franchise Definition

Franchise Definition

Posted on September 1, 2018 Tom Scarda, Certified Franchise Executive

Franchise Definition
fran·chise
noun \ˈfran-CHz\

1 : freedom or immunity from some burden or restriction vested in a person or group
2a : a special privilege granted to an individual or group; especially the right to be and exercise the powers of a corporation

b : a constitutional or statutory right or privilege; especially the right to vote
c (1) : the right or license granted to an individual or group to market a company’s goods or services in a particular territory; also a business granted such a right or license (2) : the territory involved in such a right
3a : the right of membership in a professional sports league
b : a team and its operating organization having such membership1

Word Origin and History
Franchise:
n.
late 13c., from Anglo-French, from franchir to free, from franc free,
franchise” freedom, exemption; right, privilege (12c.), from variant stem of franc “free.” Usage narrowed in 18c. to “particular legal privilege,” then “right to vote” (1790). The meaning “authorization by a company to sell its products or services” was established in 1959.1

Trivia:
The first franchise business was the Singer Sewing machine in 1851.

Some people claim that the franchising model doesn’t work. Some people almost equate the industry to a pyramid scheme. Before you think that, consider the following facts reported by the International Franchise Association, www.Franchise.org:

  • 850,000 – the approximate number of franchised units in the United States.

  • 18,000,000 – the number of people employed by a franchise operation

    nationwide. The franchise industry is the second largest employer by

    industry, second only to the United States Armed Forces.

  • $2,100,000,000,000 ($2.1 Trillion) – the economic output of the franchise

    industry annually.

    Do not misunderstand the facts. Plenty of people fail in franchises. Blame can be placed on a number of factors—undercapitalization, bad location, poor support from the franchisor, a bad franchise agreement that doesn’t allow the franchisee to make money, bad unit management. The list goes on. However, if you consider each of these issues, almost all of them relate to a poor franchise company. Even if a franchisee is undercapitalized, that falls on the franchise company. The company should have not awarded the person a franchise license.

The fact is there are no rules, regulations, or laws that dictate which businesses can be franchised and which ones cannot. So when you are investigating franchises, it’s a crapshoot if you don’t know what you’re looking for. Anyone can say that their company is a franchise and start selling franchises. Of course the company needs to produce a Franchise Disclosure Document to sell franchises in the United States (we’ll talk more about this later), but that does not guarantee that the owners of the franchise are reputable, that they will in fact give you support, or that the concept even makes money. Buyers beware.

As a Franchise Consultant, I personally do not represent just any company. The entity must meet certain criteria. When franchise companies come to us to have us represent them, my company turns down more franchise companies than we accept into our inventory because not all concepts are the best of the best. The companies we work with, by default, are looking to recruit the very best franchise partners and have a long term, successful relationship. That is why they pay my company to pre- screen people. If you're thing about a franchise, we should talk. 

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Topics: franchising, how to buy a franchise, franchise consultant, semi-absentee franchises