Introduction to Franchising

2009-10-23

Franchising, in its current form, can be traced back to the 1850’s when Isaac Singer invented the Singer Sewing Machine. Customers were reluctant to purchase the new invention without being shown how to use it, so a system needed to be devised to overcome this obstacle. Singer also needed to find a way to expand the business without the possessing the large amount of resources needed.

Singer offered licenses to business minded individuals to sell their products within certain geographical areas and these individuals were responsible for educating potential customers on how to use the new invention. The result was that customers now knew how to use the machine and this meant they could buy from the licensee, whose licensing fee went towards manufacturing even more sewing machines to meet the growing demand.

German brewers also used franchising rights from around 1880 as a method of distributing their ale to certain taverns. A similar licensing system exists in some of today’s pubs and taverns.

Since the invention of franchising all those years ago, it has become more and more refined over time. Thousands of successful franchises now exist throughout the world and thousands of business minded individuals have gone on to earn a comfortable living from buying a franchise. Many franchisees have gone on to own multiple branches of the same franchise and some have even gone onto become multi millionaires.

Franchising represents one of the least risky ways to leave employment and become self employed. Today’s franchising model is geared toward doing everything possible to make your business a success. Most franchise opportunities are based on the master franchisor charging an initial fee to the franchisee when purchasing the franchise. Monthly fees, which are calculated a percentage of your turnover, are also charged to cover marketing and administration expenses. This has meant that it is in the franchisors best interest to educate and equip you to make a success of your franchise. You’ll also be benefiting from the experience gained by the franchisor within the industry and this means you’re less likely to make silly mistakes when starting out.

Buying a franchise does however mean you have less freedom to do what you like with the business and there are often clauses restricting you from selling your franchise to the open market. Despite the disadvantages of buying a franchise, franchising represents a great opportunity to aspiring business owners and can hold the key to financial freedom for some individuals.

Our comprehensive set of guides covers both the advantages and disadvantages of buying a franchise in the UK and offers advice on topics like raising finance for buying a franchise.