Definition of Franchise
By definition, a franchise is a form of business organization in which a firm is already successful because of a good product or service called the franchisor, who gets into a contract based relationship with another business called a franchisee, who operates under the name of the franchisor for a fee. Franchise has become a popular business concept these days and many popular brands of food outlets and shopping areas are have now provided opportunities to the Franchisee’s to open business and earn profits under the franchisor name. Some of the popular franchise businesses are McDonalds, and Subway.
The franchise business is not just limited to food outlets alone, but also a chain of restaurants, schools, automobiles, health and fitness centres and financial organizations too.
How does Franchising Work?
To get into the franchise business you need to get your basics about the franchise system right. Although you would be making major investments in the business, it is only yours because you have invested, the brand name of the franchise outlet you are hoping to invest in has already made its mark in the world. The Franchisor is already well established. So the business opportunity is easy for you.
Who is a Franchisor?
A Franchisor is the person who already is running a business and has provided an opportunity to people to open an additional outlet to expand their business.
Who is a Franchisee?
A franchisee is a person who buys and runs a franchise business. He has to follow the rules and regulations set by the franchisor and pay him a certain fee as royalty to the business.
Franchise has become one of the most popular forms of business these days. It is easy as it does not require you to set up the business from scratch. The brand name does all the wonders, and all you have to do is buy the company and look for a suitable location to run it, and you will have a great business set up.
Advantages of Franchise Business
There are many advantages of running a franchise.
Since brand name is popular there is a great chance of your business doing well no matter where you are based.
Franchisor provides all the necessary training to the employees of the franchise business so you need not have to worry about learning the business on your own.
The business is ready to begin with. So you don’t have to spend time trying to organize and network business, like you would do when you set up a new business.
- Debt ratios
- Liquidity ratios
- Profitability ratios
- Asset management ratios
- Cash Flow Indicator Ratios
- Market value ratios
- Financial analysis
- Business Terms
- Financial education
- International Financial Reporting Standards (EU)
- IFRS Interpretations (EU)
- Financial software
Most WantedFinancial Terms
- Most Important Financial Ratios
- Debt-to-Equity Ratio
- Financial Leverage
- Current Ratio
- Interest Coverage Ratio (ICR)
- Solvency Ratio
- Break-even Point
- Debt Service Coverage Ratio
- Receivable Turnover Ratio
- Return On Capital Employed (ROCE)
Have 10 minutes to relax?Play our unique
Play The Game