Looking to grow your business through franchising?
This simple guide will help you understand:
What a business franchise is
The main benefits, like brand recognition and quicker growth
Common challenges you might face
The steps to start franchising your business
Find out how franchising works and see if it’s the right choice for your business expansion.
What is a business franchise?
Franchising is a business model in which the owner of a successful business, known as the franchisor, grants the rights to use its name, brand, products, systems and services to another entrepreneur, known as the franchisee, in exchange for an initial investment or ongoing royalties.
Difference between Franchising and Licensing
Franchising and licensing are two ways to let others use your brand for a fee. The main difference is how much control the brand owner keeps and how much support is given.
Franchise Agreement |
Licence Agreement |
The person or business (franchisee) gets full rights to use your brand name, products, systems, and training to open a new branch of your business. |
The person or business (licensee) gets permission to use your brand name, logo, design, or product idea—but not the full business system. |
Best for service-related businesses like food outlets, salons, or coaching centres. |
Best for product-based businesses like clothes, toys, or home decor. |
Example: A local entrepreneur opens a new outlet of a well-known coffee shop using its name, menu, and training system. |
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Types of Franchises
Job Franchise
Business offers a service for the franchisor
Usually small and simple
Example: A local travel agency or tutoring centre
Distribution Franchise
Focuses on selling products and related services
Example: Car repair shop or electronics store
Business Format Franchise
Franchisee gets the complete business model, including brand, systems, and training
Example: A fast food restaurant or fitness centre
Investment Franchise
Large-scale, service-based business requiring more investment
Example: Hotel or big event management company
Advantages of franchising a business
Franchising a business can offer numerous advantages, such as:
- Brand recognition: Franchisees can benefit from operating under a well-established brand name that is recognised by customers.
- Proven business model: Franchisees can use a successful business model that has been refined over time, reducing the risks associated with starting a new business from scratch.
- Training and support: Franchisees can receive training and ongoing support from the franchisor in areas such as operations, marketing, finance, and legal compliance.
- Network of peers: Franchisees can benefit from a network of peers who can share experience, best practices and support, both within the same brand and across the industry.
Check your business loan eligibility to understand how much financing you can secure to invest confidently in your franchise opportunity.
Disadvantages of franchising a business
You will have less control over how franchise locations are run.
The success or failure of new outlets depends on how well your franchisees perform.
You must provide ongoing training and support to your franchisees.
There are legal rules and regulations you must follow when franchising.
Unlike growing your business yourself, franchising means you don’t directly manage all operations.
Components of a franchise business
Franchise Agreement:
A legal contract between the franchisor and franchisee that explains the rules, rights, and responsibilities of both.Franchise Fee:
An initial payment the franchisee gives to the franchisor to start the franchise.Royalties:
Regular payments from the franchisee to the franchisor, usually a percentage of the sales or income.Training and Support:
The franchisor provides training and help to the franchisee, including starting support, marketing help, and advice on running the business.Branding and Marketing:
The franchisee uses the franchisor’s brand name, logo, and marketing materials to promote the business.Operational Standards:
The franchisee must follow the franchisor’s rules, procedures, and quality controls to keep the brand consistent.
Steps for franchising your business
Decide if franchising suits your business
Prepare your franchise disclosure document (FDD)
Create your operations manual
Register your trademarks
Set up your franchise company
File and register your FDD officially
Plan your franchise sales strategy and budget
