Franchising a Business

Franchising A Business

What, exactly, is a franchise? Unless you’ve been living in a cave, you probably already know most of the businesses you know and buy from are franchises. The local McDonald’s is owned and operated by someone who lives and works in your community, yet its image, advertising and products are virtually identical to those you’ll find at McDonald’s in every city and state and many countries around the world. But how does a franchise work and why are they so popular?

Franchising, by definition, is a method of expanding a business not by opening additional branches, but by licensing others to use its name and operating system in return for fees. It’s one of the most dynamic business sectors in the USA today and is being used in virtually every industry. Franchising has revolutionized retailing in America, providing small and moderate-sized companies with the resources needed to compete with such dominant corporations as Wal-Mart and others.

Although the concept of franchising dates back to the Middle Ages, the practice is not really very old. Franchising was first used in the United States in the 1950’s, with the growth of the fast food industry. Recent years have seen the popularity of franchising rise significantly. Almost nine hundred new franchise concepts began franchising during the past three years, and currently, franchising accounts for nearly one trillion dollars in sales each year. Some forty percent of all retail sales are made in a franchised business.