How Do Franchise Businesses Work?

There are many parts to the American dream, including both independence and security. When you start your own business, you can accomplish both of these goals, gaining the freedom to run your professional life as you see fit, while enjoying the fruits of your labor. For any entrepreneurial-spirited adult looking to leave the 9-to-5 behind, owning and operating a business is ideal.

Of course, this is no easy feat. First you have to come up with a stellar idea, or at least find your niche within an industry. Then you have to conduct market research, create a solid business plan, and secure financing from lenders or investors before you can even get started with setup. It’s a lot to contend with – too much for some people.

There is, however, an alternative. Instead of coming up with your own business idea, you might consider buying a franchise. By entering into an established business entity, you’ll find that a lot of the heavy lifting for starting a business has already been done for you. Before you sign on the dotted line, though, you need to understand how franchises work.

What will you get for your purchase? What obligations will you have to fulfill, and what restrictions will you have to observe? Is a franchise business right for you? Here’s what you need to know about how franchise businesses work.


If you decide you’re interested in purchasing a franchise, the first thing you should know is that the costs are going to be different than starting your own business. When you start your own company, you have to come up with financing for a location, employees, supplies, and other startup costs.

When you buy into a franchise, you have all of these costs, as well as the initial cost of purchasing the franchise. Consider that this cost is basically for purchasing all the hard work the franchisor has already done to develop a product/service that is recognized and desired among consumers. In essence, you’re paying for that recognition and the immediate benefits it infers.

If you open a brand new fast food restaurant, you’ll have to market it cold to an audience that doesn’t yet know they want it. If you open a McDonald’s franchise, you’ll have brand patrons in your store the minute you open the doors. This is what you’re paying for when you buy a franchise, and it could cost you dearly. McDonald’s franchises go for roughly $1-2 million plus, but you also have the opportunity to recoup costs and show profit a lot more quickly. It’s a trade-off.

Don’t forget that most franchises also have ongoing fees, such as a percentage of sales and/or flat fees for specific services. It’s a good idea to ask about all costs upfront.


Although you’ll have some additional expenses when purchasing a franchise, this should be offset by franchisor support, which could consist of ongoing training and operational guidelines, including everything from decor and employee uniforms to policies and procedures. Some companies also provide marketing materials for company-wide advertising campaigns, just for example.

Payment and support structures differ from one franchise to the next, but you should also expect that franchisors will offer guidance, advice, and assistance that will help you to be successful in your endeavors. After all, your business reflects on their brand. It’s important to understand what you get for your money when you buy into a franchise.


In addition to support services, many franchisors provide some protections for their franchisees. For example, they often have rules about how close one franchise can be to another in order to avoid direct competition that hurts franchisees and damages the brand as a whole. They may help franchisees to choose a suitable location and mediate disputes between franchisees, should they arise.

Obligations and Restrictions

When you buy a franchise, you buy into a brand that is owned by another party. While you have some latitude to run your business as you see fit, you must do so while operating within the guidelines set forth by the franchisor. After all, they have a right to protect their brand and ensure that all of the franchises are in keeping with core missions, goals, values, and so on.

Unfortunately, this could mean you have to abide by some practices you don’t necessarily agree with. It is for this reason that you and your lawyer need to go over your contract with a fine-tooth comb. When you understand all the ins and outs of your preferred franchise opportunity in Tampa, you have the best chance to enter into a business agreement that benefits everyone involved.

Back To Top