What is Franchising? Your Franchising 101 Explainer

Unleashed Brands uses our blog section to educate our readers about the value of our youth enrichment franchise concepts, as well as the industry in general. In the past, we’ve covered such topics as Launch Days, franchising in a recession, and how some families use franchising to establish a legacy business for the next generation. Hopefully, you’ve found our information to be both useful and enlightening.

But we believe that when it comes to entrepreneurship, there’s really no subject that’s too basic. This is why we decided to work our way backwards a bit and cover the very basics of the franchising business model. While you may already be familiar with the concept, we hate to take anything for granted. So, without further ado, we present our latest educational topic – What is Franchising?

A Definition From the Top

The International Franchise Association (IFA) is our industry’s largest and most comprehensive trade organization, dedicated to education and advocacy for the entrepreneurial venture known as franchising. Founded in 1960, this nonprofit organization is committed to advancing the agenda of our industry among its many members including franchise brands, executives, vendors and suppliers. How do they define what a franchise is? Here’s the statement on their website, describing the arrangement in the simplest of terms:

“A franchise (or franchising) is a method of distributing products or services involving a franchisor, who establishes the brand’s trademark or trade name and a business system, and a franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system.”

Breaking it down further, there is a franchisor – or brand – who owns and operates the concept. And a franchisee – or licensed business owner - who pays a fee and recurring royalties in exchange for doing business under the name, image, and likeness of the brand within a specified territory.

The Easiest Path to Business Ownership

Entrepreneurs who wish to become their own boss have three basic avenues for establishing business ownership of their own. They can start a business from scratch, buy an existing operation, or choose franchising as means to accomplish this goal. Franchising is widely seen as the most advantageous route because franchisors provide the product or service, proven business model, systems, and name recognition – combined with the training and ongoing support necessary for owners to be successful.

Establishing a Mutually Beneficial Fit

For the franchisor-franchisee exchange to work, it takes mutual cooperation and a good fit. The franchisor must provide the product or service, operational systems, training, and support. But the franchisee must be willing to follow the proven business model according to the brand’s precise guidelines, rules, and regulations. That’s why it’s so important for each entity to find the right fit. Franchisors are always looking for the right qualified candidates to own, operate, and represent their brand. And franchisees are looking for the right fit among thousands of franchise concepts on the market today - as it pertains to their interest level, experience, and financial tolerance.

Additional Terms You Should Know…

Here is some additional terminology that will help familiarize franchising’s business model and processes:

Investigative Process – this refers to the process of franchisee candidates reviewing various franchise concepts to find a suitable match. It’s typical to begin researching several franchises, then narrow down your preferred list to a few select finalists that match your lifestyle and goals.

FDD, Franchise Agreement, and Operations Manual – these three documents are of the utmost importance in the franchising industry. The Franchise Disclosure Document (FDD) contains 23 sections that spell out – in great detail – every aspect of the proposed business opportunity. The Franchise Agreement covers the roles and responsibilities of the franchisor and franchisee alike. And the Operations Manual is a step-by-step, how-to guide for owning and operating a particular franchise concept.

Validation – this is a stage in the investigative process where franchisee candidates are given the opportunity to participate in one-on-one discussions with executives from the franchise brand, as well as existing franchisees in the system.

Discovery Day – this is one of the final stages of the franchising process, typically consisting of an action-packed day of in-person meetings at the franchisor’s headquarters. At Unleashed Brands, we refer to this event as Launch Day.

While franchising can seem like a complex industry, it’s quite simple and offers opportunities for business ownership well beyond just restaurants. Perhaps now that you’re more familiar with these introductory terms and processes, you’ll be much more confident, prepared, and willing to begin an entrepreneurial journey of your own.

If so, it’s a journey we hope to take with you.

A Little More About Us…

The Unleashed Brands platform includes Urban Air Adventure Park, Snapology, The Little Gym, XP League, Class 101, and Premier Martial Arts youth enrichment franchises. As the parent company, Unleashed Brands was founded to curate and grow the most innovative and profitable business opportunities that help kids learn, play and grow. Over the last 10 years, the team at Unleashed Brands has built a proven platform and know-how for scaling businesses that focus on serving families. All have become first-in-category brands by providing fun, engaging, and inspiring experiences that help kids with their No. 1 development goal – to become who they were destined to be.

To speak with one of our franchise experts and learn more about our children’s business opportunities, simply fill out this form and an Unleashed Brands representative will be in touch shortly.