What is Franchising?

When most people hear the word franchising, global fast-food giants like McDonald’s or Burger King often come to mind. But franchising goes far beyond quick service restaurants. Today, it offers entrepreneurs opportunities across a wide range of industries – from education and health to retail, finance, and home services.

As one of the fastest-growing business models worldwide, franchising provides a proven way to reduce many of the uncertainties that come with launching a start-up. With hundreds of brands actively expanding through franchising, it has become a cornerstone of modern business growth. But what exactly is franchising, and how does it work? Let’s take a closer look.

What is a franchise?

At its core, franchising is a system in which a business (the franchisor) grants another party (the franchisee) the right to operate under its brand name. In exchange for fees and ongoing royalties, the franchisee can sell the franchisor’s products or services within an agreed territory.

Franchises are everywhere. Walk down your local high street and you’ll spot well-known names like Subway and Costa Coffee, alongside concepts such as Tutor Doctor, Apollo Blinds, or DNS Accountants. Each is an example of how franchising allows a brand to expand quickly while giving entrepreneurs the chance to own and operate a recognised business.

The franchisor and the franchisee

The relationship between franchisor and franchisee is the foundation of franchising.

• The Franchisor – the business owner that grants the licence, provides the brand, proven business model, and operational know-how.
• The Franchisee – the local operator who invests in the franchise, manages day-to-day operations, and benefits from the brand’s reputation and support.

Franchisors supply their franchisees with established systems, training, and ongoing guidance, reducing the risks associated with starting a new venture. In return, franchisees agree to follow brand standards, ensuring consistency across all outlets.

The franchisor–franchisee relationship

Franchising is ultimately about partnership. The franchisee pays an upfront fee and often ongoing royalties for the right to trade under the franchisor’s brand, usually for an agreed period (commonly 5–10 years). In return, they gain access to marketing resources, operational systems, training, and sometimes territorial exclusivity.

While the franchisee runs the business on a day-to-day basis, the franchisor retains control over how products and services are marketed and delivered. This ensures customers enjoy the same experience across every branch of the brand.

The advantages of franchising

Franchising brings benefits to both sides of the partnership.

For franchisees:

• Lower risk – launching under a trusted brand reduces many of the challenges faced by independent start-ups.
• Established customer base – a recognised name can instantly attract customers.
• Economies of scale – access to bulk purchasing reduces supply costs.
• Training and support – franchisors provide staff training, business systems, and ongoing guidance.
• Financing options – banks often see franchise businesses as lower risk, making it easier to secure funding.

For franchisors:

• Faster expansion – grow into new regions without the costs of traditional expansion.
• Shared risk – franchisees invest their own capital, reducing financial burden.
• Revenue streams – franchisors benefit from upfront fees and ongoing royalties.

The costs of franchising

Buying into a franchise requires investment, which varies depending on the sector and brand. Some home-based or smaller concepts may cost as little as £10,000, while larger, more established opportunities – such as in hospitality or hotels – can run into the millions.

On average, many franchise licences fall between £50,000 and £250,000. In addition to the initial franchise fee, franchisees should budget for:

• Professional fees (legal and accountancy)
• Premises or equipment costs
• Staff wages and training
• Marketing contributions
• Ongoing royalties (typically 4–7% of revenue)

Franchisees also need enough financial stability to support themselves for at least the first year, as it can take time for any new business – including a franchise – to become profitable.

Who is really in control?

Each franchise outlet is independently owned and operated by the franchisee, but within the framework of the franchisor’s system. This balance ensures that while the franchisee runs their own business, the franchisor maintains consistency across the brand.

Strong collaboration between franchisor and franchisee is essential. Agreements clearly outline expectations, responsibilities, and commitments on both sides, ensuring a mutually beneficial partnership.

Can you franchise your own business?

If you’re a business owner wondering whether franchising could be the right growth strategy, professional guidance can help. With expert advice, you can assess whether your business model is suitable for franchising and explore the steps involved in setting up a successful franchise network.

Final thoughts

Franchising is one of the most effective ways to grow a business and one of the most secure ways to become a business owner. Whether you’re exploring opportunities as a franchisee or considering franchising your own company, understanding the principles, costs, and commitments involved is the first step to success.

You might also be interested 

Pros and Cons of Franchising

Franchising can fast-track your business ownership, but it also comes with trade-offs. Find out the advantages, the constraints, and what to watch out for.

Read more

SWOT: Find your Franchise

Thinking of investing in a franchise? Learn how to apply a clear SWOT analysis to assess strengths, weaknesses, opportunities and threats, and choose the brand best aligned with your goals.

Read more

Blueprint for Success

Every successful franchise follows a roadmap. Discover the key steps, habits and frameworks that help franchisees build and scale with confidence.

Read more