What is a Business Franchise?

What is a Business Franchise?
Discover insights on what franchising is, the difference between Franchisee vs Franchisor and the pros and cons of franchising. Find out more with Square today.
by Square May 25, 2023 — 5 min read
What is a Business Franchise?

Not every small business is about unique, show-stopping ideas. Though the concept of the entrepreneur is underpinned by a ‘Eureka!’ moment, that’s simply not always the case in reality. If you want to give business ownership a go but don’t have an idea that’s ready to market, or if you just want to operate within a safety net where support and reputation are already built-in, a franchise could be a great choice.

What is a Business Franchise?

Simply put, a franchise is when a larger company ‘leases’ its name, products and services to a third party who then offers these to the public in return for a cut of the profit. While this may seem like the brand is employing a person as a location manager, the responsibility of customer service, financial management and product management is all down to the franchisee.

It is a contractual agreement, at the end of the day. The length of franchise licences varies, but there are usually always options to renew.

According to IbisWorld, in 2021 there were more than 90,000 franchise units across the country, valued at over $180 billion.

Franchisee vs Franchisor

A franchising business, also known as a ‘franchisor’, is the original owner of the brand, services and products in which a ‘franchisee’ can invest. This franchisee can be an individual or a business entity in its own right. By investing in the franchisor, the franchisee can trade under their name and offer the same products and services. With the support, experience and proven business experience of the brand behind them, franchisees can start up their own branch of the franchisor’s business in no time at all.

Franchising allows you to enjoy owning a retail site, having your own team and running a branch of a business, but it also restricts you to the broader processes of the brand you’ve bought into. There are many other pros and cons to consider before taking the plunge as a franchisee.

Pro and Cons of Franchising

There are plenty of positives and negatives to consider when starting out as a franchisee. If starting a small business from scratch isn’t your forte, your strengths may lie in a franchise business instead. Here’s what you need to think about before moving forward:

Pros:

Cons:

Famous Franchises

While some franchisees might say McDonalds or KFC are great franchises to invest in, they’re also extremely popular – and it’s a lengthy process to get involved. Fortunately, there are plenty of other options that are much easier to come by. Here are some of Australia’s best known, and most available, franchises:

Square
The Bottom Line is brought to you by a global team of collaborators who believe that anyone should be able to participate and thrive in the economy.

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