Defining Franchising

The word ‘franchising’ originates from the French language and outlines a type of business wherein the franchisor (the owner of a business) delegates the right to market and distribute the business’s goods or services to an independent person / persons for a pre-determined time period. This system first appeared in business horizons during the Middle Ages and gained momentum until it scaled great heights over the following centuries.

The franchisor can offer various tangibles and intangibles as part of the franchising agreement and also support services including advertising, marketing and training. Careful monitoring of the business practices of the franchisee helps the franchiser to determine the success / failure of the agreement.

‘Business format franchising’ is probably the most common format of franchising. The core hallmarks of a successful franchising agreement are standardization, consistency and uniformity and it is a competent strategy that can be used to capture market share. Franchising acts as a marketing system that creates an image of a company’s products and services amongst the customers. It is a good strategy for attracting and retaining customers and also simultaneously helps meet customer requirements.

An interdependent business relationship that involves the co-operation of a large number of people, franchising paves the way for people to share; brand identification, a proven marketing and distribution system and an effective way of conducting business. It requires a strategic alliance between the concerned stakeholders as they work towards a common goal. At the outset, franchising is not really a business by itself but rather a way of doing business. It is essentially an innovative way of distributing the goods and services of a company.