What is Franchising?

Franchising is a way of marketing goods or services using a proven business formula. The owner of the business formula (the franchisor) grants a licence to others (franchisees) to run a business, using the system of doing business the franchisor has established. The franchise system includes a format for the conduct of the business, management supports for operating the business and a shared trade identity.

Why choose Franchising - the franchisee perspective
Starting a business always carries risk, but buying into a franchise could reduce that risk for a franchisee, as it enables a franchisee to use the franchisor's proven business system, and avail of ongoing supports offered by the franchisor.

Franchisees enter into a legally binding contract known as a franchise agreement, under which the franchisor shares their know-how, supports and established trade name & branding with franchisees.

What is in it for the Franchisor?
In return for allowing the franchisee to use the franchisor's name and system and supports, the franchisee pays fees. The franchisee pays initial fees, when the franchise agreement is signed. These are mainly to cover the costs the franchisor incurs in helping the franchisee set up in business. Franchisees also make ongoing payments to the franchisor throughout the term of the franchise agreement. These payments are normally in the form of either:

A management services fee (or royalty) calculated as a percentage of the franchisee's sales turnover.
Or
A mark-up on the goods or materials the franchisor sells to the franchisee, in the same way that a wholesaler takes a margin on the goods or services they supply to a retailer.

As a bank, we do not warrant, recommend or endorse any individual franchise. Before you invest in a Franchise please take franchise specific independent legal and financial advice.