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What is Franchising?

Many people dream of owning their own business. A popular method of achieving this goal has been to purchase a franchise. What is a franchise? What is franchising? You have all heard of it, but what is it, really?

Franchising is the business response to the massive amounts of capital required to establish and operate a company-owned network of product or service vendors.

Simply defined, franchising is a system of marketing and distribution in which an independent businessperson, for a fee, is granted the right to market the goods or services of the franchisor according to the established standards and practices of the franchisor.

Franchising is a package deal! To be a franchise under the Wisconsin Franchise Investment Law the deal must include:

  1. a marketing plan (either required or suggested);
  2. association with a commercial symbol (e.g., trademark); and
  3. a franchise fee.

Ideally, the franchise system forms the perfect marriage between big business and the small businessperson. The franchisor obtains new sources of expansion capital, new distribution markets, and self-motivated vendors of its products, while the franchisee acquires the products, expertise, stability, and marketing savvy usually available only to larger enterprises.

The relationship between franchisor and franchisee is controlled by a contract which defines a series of duties, obligations, and promises.