What is a Franchise Business?

A franchise business is a business in which the owners, or franchisers, sell the rights to their business logo and model to third parties, called franchisees. It is hard to drive more than a few blocks in most towns without seeing a franchise business. Examples of well-known franchise business models include McDonalds, Subway, UPS, and H & R Block. In the U.S., there are franchise business opportunities available across a wide variety of industries.

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What Do Most Franchise Businesses Have in Common?

There are many commonalities between one franchise business and another. One basic commonality is the method by which the franchise owners and buyers do business. The owner of the franchise business, or the franchisor, sells the trademark rights to the franchisee, who opens up a replica of the owner’s company. This franchise business is run by the franchisee, under methods created by the franchisor, and under the franchisor’s particular trademark, trade name, logotype, and advertising.

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How To Franchise a Great Business Idea

A franchise idea is a great way to expand your business, as it is an opportunity to get your idea out there without having to assume the risks and come up with the capital all by yourself. When you franchise a business, the franchisee pays the franchisor a fee up front. This fee generally covers the right to operate a business under the franchise trademark as well as operation training for the business.

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Can a Buyer of a Franchise Select the Business Location?

The amount of input a buyer may be able to give when determining the location of their franchise will also depend on the experience of the franchisor. Because the franchisor knows its brand the best, a franchisee should be open to receiving the franchisors input when determining where to open her franchise.

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Do Franchise Laws Vary by State?

While every franchise business is subject to the Federal Trade Commission (FTC) Franchise rule, franchises are also subject to state franchise laws and regulations as well. While the FTC rule is aimed at all types of franchises, many state regulations are industry specific. Further, franchise law is not a completely separate body of law, since it also involves other state laws such as trademark, intellectual property, and commercial laws.

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How To Buy an Existing Franchise

Buying a franchise business can be a great investment opportunity. However, as with any investment you make, you must be sure to do your research before committing. Before you buy an existing franchise, you should assess your skill-sets and financial capabilities. You will also need to determine your investment budget. Further, many franchises require special knowledge, which may be difficult to learn on the job. Some examples of franchise business models that require special skill sets may include franchises for tax preparation, auto repair, or even some types of restaurants.

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