A franchise is a business model where the owner of the original business (franchisor) grants rights to individuals or other business owners (franchisees) to run a business using an established brand, system, and ongoing support.
A Brief History of Franchising in Business
Franchising has been around since the 19th century, but it gained real momentum in the 20th century as well-known brands began offering business opportunities with built-in support systems.
The idea of franchising has evolved significantly since the 19th century, reaching its peak growth during the 20th century. In its earliest form, the concept wasn't as structured as it is today. For instance, King of Prussia once opened multiple bookstores in different cities — a precursor to modern franchising.
However, the franchising model as we know it truly began to take shape in the 20th century. A notable early example is A&W Root Beer. In 1921, it allowed individuals to open their own A&W stores using the brand's recipe and system, paving the way for franchised food and beverage businesses.
The real turning point came with the rise of fast-food giant McDonald’s. In 1955, Ray Kroc acquired the franchising rights from the original founders and developed a highly structured franchise model. His innovative, systematic approach laid the foundation for franchising across various industries.
Read also: Franchise Businesses Under Rp5 Million: Opportunities for Beginners in the Digital Age
Types of Franchise Models
There are several common types of franchise businesses, including:
1. Food & Beverage Franchises
This is the most common type, where the franchisee gets the right to sell food or beverages under an established brand. This includes fast-food restaurants, cafes, beverage kiosks, and other eateries. Franchisees receive training on recipes, food preparation procedures, and brand standards to maintain consistency across all branches.
2. Retail and Service Franchises
This includes retail outlets such as convenience stores, pharmacies, and clothing shops. It also covers services like beauty salons, auto repair shops, and electronics servicing. Franchisees benefit from an established brand name, operational guidance, and marketing support from the franchisor.
3. Manufacturing Franchises
This model allows a franchisee to produce and sell specific branded products. The franchisor provides the tools, raw materials, and expertise. Examples include household equipment, toys, and branded products from specialized industries.
Why Open a Franchise?
There are many advantages to starting a franchise business. Here are some of the key benefits:
1. Training and Support
One of the biggest perks for franchisees is the training and operational support from the franchisor. This often includes operations, management, and marketing guidance.
With proper training and clear SOPs, franchisees are more prepared and confident to run the business successfully.
2. Established Brand Recognition
Partnering with a well-known brand gives you a significant head start in terms of brand recognition. Customers are more likely to trust a brand they’ve seen or heard of before, making it easier to enter the market with confidence.
3. Lower Business Risks
Starting your own business from scratch often involves a higher level of risk, especially if the concept is untested. Franchises come with proven systems and business models that have been refined over time, helping you avoid common mistakes and reduce the risk of failure.
4. Marketing Support
Franchisees benefit from marketing efforts handled by the franchisor. From social media to advertising campaigns and promotional materials, you won’t have to build a marketing strategy from zero.
Most franchisors provide comprehensive marketing strategies to support growth and brand visibility across all branches.
How to Start a Franchise
Here are the key steps to getting started:
1. Market Research and Franchise Selection
Before you dive in, it’s crucial to conduct in-depth market research. Understand local customer needs, preferences, and behavior patterns.
Identify rising trends, growth potential, and the most promising target markets. From there, choose a franchise brand that aligns with those insights and your personal interests.
2. Financial Planning
Starting a franchise involves upfront costs that vary by brand and industry. Be sure to account for licensing fees, training, equipment, initial stock, rent, and other startup expenses.
Once you’ve calculated the total costs, determine how you’ll fund the business — whether through personal savings, bank loans, or investors. Make sure you’re financially prepared before committing.
3. Contract Negotiation and Location Setup
Once you've chosen a franchise, the next step is negotiating a contract with the franchisor. This agreement outlines your rights and responsibilities, including royalties, contract duration, and operating standards.
Understand the terms carefully, and seek legal help if needed. Then, choose a strategic location that aligns with your target market. A good location increases visibility and foot traffic, which can lead to higher sales.
4. Operational Setup
Before launching, you’ll undergo training provided by the franchisor to ensure you understand the systems, quality standards, and day-to-day operations.
You’ll also need to design your layout based on brand guidelines and recruit a team that can deliver excellent customer service from day one.
5. Launch and Promote
Once everything’s in place, it’s time to launch. Run a local marketing campaign to spread awareness about your franchise. Use social media, promo offers, and local partnerships to attract your first wave of customers.
That wraps up our guide to the franchise business — from types and benefits to practical steps for getting started. In short, a franchise can be a powerful way to start a business without having to build everything from scratch. With brand support, proven systems, and ongoing guidance, franchising could be your path to long-term success.
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