FirstLight Franchise Blog

What Is A Franchise?

By definition, franchising is the practice of using another firm’s prosperous business model, their expertise, ideas, and in the case of FirstLight HomeCare, their established name and branding. In return, you pay an initial fee to acquire this right and a percentage of gross sales throughout the terms of the franchise agreement.

There are thousands of franchises across the U.S. today across all areas of business. Many of us know the big ones – such as McDonald’s and Wendy’s. The important thing to remember is that the Franchisor is selling way more than burgers – they are selling a proven business model that sells burgers, including marketing, help with location, recipes, etc. Then there are the businesses we think are franchises but are not – Victoria’s Secret and Starbuck’s — which are actually corporate owned stores versus franchises.

As Franchising.com says: “In short, franchising is a strategic alliance between groups of people who have specific relationships and responsibilities with a common goal to dominate markets, i.e., to get and keep more customers than their competitors.”

There are many misconceptions about franchising, the first is that you “buy a franchise.” In reality, you license a franchise, meaning you have the rights to use the brand name, operating system and receive ongoing support. If you adopt the “ownership mentality” you can undermine the whole reason you bought the franchise which is to take advantage of an already established business model. It is better to think of yourself as a team member, working with other franchisees in the system to dominate your marketplace. You indeed own the assets of your company, but you are licensed to operate someone else’s business system.

The Size of The Franchise Industry

According to the International Franchise Association, the franchise industry is large and continues to grow :
• In the U.S. alone, there are an estimated 1500 franchise companies and that number is growing every day.
• The number of franchise units across America exceeds 785,000.
• The franchising industry as of 2011 in the U.S. employs more than 7.8 million people.
• In 2011, economic output was forecasted to be almost $740 Billion.
• The International Franchise Association submits that about 4% of America’s small businesses are franchises.

In our next article, we’ll discuss the advantages of franchising and why it’s such big business.