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Oct
10
2018
OWNERSHIP

Opening a Franchise Business - How the Franchise Structure Works

Opening a Franchise Business - How the Franchise Structure Works

If you’re an aspiring entrepreneur searching for the right career path, chances are you’re not interested in simply finding a job to provide a steady paycheck. You want more from a career – the opportunity to be a part of something bigger and to help people solve problems, more freedom to build a business of your own and more flexibility to grow that business into something great. For aspiring entrepreneurs, there are two main paths to achieving this career: starting a business from scratch or opening a franchise business.

When you start a business from scratch, you develop an idea for a product or service from the ground up. You outline a business plan and build your brand. You find your own systems and tools. You develop your own marketing strategy and training plans. Essentially, you’re in business for yourself and by yourself.

Opening a franchise business is a little different. First, you invest in an already established brand and existing franchise system that then provides you with processes and tools to help you run your business. With franchising, you’re still in business for yourself, but you’re not by yourself.

Franchising can be a terrific choice for entrepreneurs – you get to run your own business while leveraging the support and reputation of an existing brand. However, if you’re not familiar with how franchising works, it can be a little complex to navigate at first. If you’re interested in opening a franchise business but are a little unsure of the basics, this article will help you gain a better understanding of common franchising terms and how the business model works.

Common Franchising Terms

Before diving into the logistics of opening a franchise business, let’s look at some common franchising terms. 

Franchisor:

The company that grants a license to a third party (a franchisee) to conduct business and use the trademarks for that brand.

Franchisee:

A person or company that licenses the right to conduct business under a franchisor’s brand name.

Franchise agreement:

The legal, written contract between the franchisor and franchisee which defines what is expected of each party.  As a part of the agreement, the franchise license will outline the relationship between the franchisor and franchisee including:

  • The use of the franchisor’s trademarks.
  • The fees associated with opening and running a franchise.
  • The support system from the franchisor.
  • The level of control each party retains.

Trademark: 

The marks, brand name and logo that identify a franchisor that are licensed to the franchisee. 

Royalty:

The ongoing fees paid by the franchisee to the franchisor.    

Frequently Asked Questions When Opening a Franchise Business

Now that we’ve covered some of the common franchising terms, let’s look at some frequently asked questions (FAQs) that prospective franchisees commonly have when they’re investigating buying a franchise.

How do franchise systems work?

In franchising, franchisors specify the required and recommended products and services that the franchise owner must offer. Franchisors also provide franchisees with the operating systems and processes they will need to operate a franchise location, as well as ongoing business support and a license to use their trademark.

Each franchise system works a little differently. As a franchisee, your working relationship with a franchisor is laid out in the franchise agreement. Make sure to review this document carefully before investing in the business opportunity. It’s also a good idea to have a legal professional review the document before signing.

What kind of support do franchise systems provide?

Franchisor support varies from brand to brand. But, franchisors generally provide franchisees:

  • Site selection and help opening the location.
  • Operating manuals and training.
  • Brand standards and assets.
  • Marketing and advertising support.
  • Ongoing technical support and business guidance.

How much does it cost to open a franchise?

The cost to open a franchise varies quite a bit across franchise systems. And, within each system, there can be a range of franchise fees that vary depending on the location, the level of ongoing support, recurring fees, etc. Once you decide on a few potential brands, make sure you understand all of the costs associated with opening a franchise and the ongoing expenses of running that business.

Do franchise systems provide financial assistance?

Many franchise systems offer financial assistance. Depending on the situation, franchise financing may be available to help new franchise owners get their business started, to help existing franchisees do upgrades or repairs, or even to purchase new equipment necessary to run the business. The UPS Store partners with financial institutions to offer a full suite of funding options for prospective franchisees. Before you consider buying a franchise, do your research to understand the different financing options available to you.

Can I own more than one franchise location?

The number of franchise units that an individual franchisee can own varies. Many franchise brands allow – and even encourage – franchisees to own multiple locations.

What types of businesses work best as franchises?

There are a lot of business categories that lend themselves to the franchise business format. The International Franchising Association (IFA) lists more than 20 franchise industries and categories, plus another 100 or so sub-categories. Popular industries include restaurants, business services and home services.

What’s the best way to research potential franchise business models?

Finding the right franchise business model can be a difficult and lengthy process. If you’re considering franchise ownership, you’ll want to carefully review and evaluate the strengths, weaknesses, opportunities and threat for each potential brand.

Here are some helpful steps to take when you investigate franchise organizations:

  • Start with industries you have prior work experience or a strong interest in.
  • Conduct extensive market research for your top potential brands.
  • Use financial and legal advisors to help navigate the licensing and contractual agreements.
  • Develop marketing and business plans for your chosen franchise system before investing.

Where can I go to learn more about franchising?

If you’re interested in franchising and want to learn more, you’re in luck, the world of franchising has a vast collection of resources to help potential franchisees find the right brand. Here are a few to get you started:

Ranked for 28 Consecutive Years

Ranked for 28 Consecutive Years

The UPS Store has been ranked #1 in the postal and business services category for 28 years. This has earned us a #3 Most Consistent Franchise Award in 2018. Additionally, we made impressive jumps to rank #4 in the Top 500 Franchise Opportunities in America.

We Proudly Support Our Veterans

We Proudly Support Our Veterans

Participating partners with the VetFran program, The UPS Store offers qualifying veterans $10,000 off their franchise fee to start their new business. To learn more, contact The UPS Store Franchise Development Team.

Kristin Howard

Franchisee, Michigan

The reason my husband and I decided to go into franchising and specifically with The UPS Store, is the different opportunities we're given with the business. The UPS Store has name recognition as well as opportunities to expand.

Debbie Adams

Franchisee, Kentucky

What I enjoy most about being a The UPS Store owner is working with my customers. We are the solution specialists for our customers.

Jim George

Franchisee, Illinios

My favorite part about The UPS Store network is the camaraderie with other franchisees. Everybody loves to help everybody else. You’re really part of a family.

Greg Murray

Franchisee, Florida

The interesting thing about The UPS Store is that when a customer walks through the door there's an extremely high probability that they're coming there to do something that is important to them. So at the end of the day, what we do for customers is very important and they are trusting that we are going to do it well.

See the Full Testimonial

Mariana Huberman

Franchisee, Washington, D.C.

One of the things that I love about The UPS Store franchise system is that you're not ever in this by yourself. The franchisees of The UPS Store network are great.

Heidi Morris

Franchisee, Colorado

The thing I enjoy most about being a The UPS Store franchisee is I get to get up, go to work and know that I'm helping other business owners succeed in what they're doing.

Bob Brown

Franchisee, Tennessee

Owning a The UPS Store franchise has changed my life because it's finally given me the opportunity to engage my customers and my staff and be able to take real pride in what I do. As a franchisee, we get faced with solving peoples' problems every day and we do everything we possibly can to try to help.

Marie Jensen

Franchisee, Oregon

My favorite thing about The UPS Store is the variety. I love the variety of customers, I love the variety of services; getting to know the customers, meeting their needs, finding out how we can help them accomplish what they need to accomplish and seeing how happy they are. That makes me ecstatic.

Tad Mollnhauer

Franchisee, Florida

With the products and services that The UPS Store provides we can make a difference in people's lives and that is the best reason for being a The UPS Store owner.

Joy Batchelor

Franchisee, Idaho

What makes being a The UPS Store franchisee worthwhile at the end of the day is the customers. The customers treat us like we're family.

Paul Erchinger

Franchisee, Texas

One nice benefit of owning a The UPS Store franchise for me has been that it gives me the opportunity to be more involved in the community. As I make relationships with others it seems like no matter what the environment is, in one way or another business comes out of that and that's not my objective—it's been a secondary benefit to being involved in the community.

Chris Reminder

Franchisee, Ohio

There are several things that I really enjoy about being a The UPS Store franchisee. First and foremost it allows me to get to know the people in the local community and that is a lot of fun. We get to see people on a regular basis. We get to know their life stories. That's a lot of fun.

Bruce Jones

Franchisee, Kentucky

Since we have joined The UPS Store, our life has changed by just having more time to spend together as a family. We've been very fortunate with the stores that we have and we have a great staff that looks out for our best interest and we look out for theirs.

Lonnie Williams

Franchisee, Oklahoma

What makes The UPS Store so successful is it gives each individual an opportunity to grow with the network and just meet the challenges that are brought to them on a daily basis. Every day gives us a new opportunity to help another person, to help another small business, to answer a question and to solve a problem.

Jeff Graham

Franchisee, Alabama

I love my customers. I love my employees. I love every person, every face that comes into my store. I enjoy every day going into work and I can't see doing anything else for the rest of my life.

Stacie Stigar

Franchisee, Alaska

I think that this franchise is so successful because of all of the resources that are available to us as center owners—we have marketing materials, we have so many different opportunities for help from the home office, and it just really makes for a great franchise.

Don Pollard

Franchisee, New Jersey

I think the thing that makes this franchise successful is a number of things. First of all we have an outstanding system, we have a great product, a great brand, and we're able to attract dynamic people to run these centers and run the business. So I think when you put all that together it really provides for a winning combination.

Mary Ellen Nichols

Franchisee, Tennessee

The thing I love about the franchise is that you have the UPS name backing you but yet you also have the autonomy to make your own decisions to promote.

Laura Griffin

Franchisee, Florida

In the eight short months I've owned my The UPS Store it has really changed my life. I've gone from being an employee of someone else to being an employer of my associates. It's a big responsibility but it's exciting every day.

Sandy Scandrett

Franchisee, Wisconsin

Being a The UPS Store franchisee has improved every aspect of my life. It's very rewarding financially, professionally, and emotionally. I have a large number of regular customers who are really, really appreciative of everything we do.

Kristie Robison

Franchisee, Alabama

I would say owning a The UPS Store location has changed my life to where I have more time and flexibility. In owning your own business you get your store up and running and you get employees that you can trust that are going to help keep your store running. This allows me to attend my two boys' ball games and also travel and do things with them so it has really changed my life for the better.