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Franchising: What It Is and How It Works

what is franchising
Franchising is not only a viable work opportunity but also a promising investment for those looking to establish their own business and forge an effective partnership.
For those planning to grow their business or seeking a collaborative venture to extend services, franchising offers an ideal model.

However, before embarking on this journey, it is crucial to fully understand the structure and nuances of this business arrangement, enabling a well-informed and confident start. Here’s an overview of franchising and how it works.

What is Franchising?

Franchising refers to a commercial affiliation, a collaborative agreement between entrepreneurs, designed to produce or distribute goods and services. It is a formal partnership agreement where a brand provides support during the start-up phase of a new business.

This model allows entrepreneurs to leverage the reputation of an established brand.

It operates on a system of mutual obligations and benefits, formalised through a contract in which the parent company grants the franchisee the rights to sell its goods or services. In return, the franchisor provides technical support and a proven operational methodology.

Key Characteristics of Franchising:

  1. A commercial affiliation fostering collaboration between independent entrepreneurs.
  2. Each party remains economically and legally independent of the other.

The unique feature of franchising lies in its collaborative framework, where both parties retain their independence while minimising entrepreneurial risks. Franchisees benefit from expert guidance, established know-how, and operational support, which collectively increase the likelihood of achieving profitability in a relatively short time.

How Does Franchising Work?

To understand how franchising operates, it is essential to explore the different types of franchising arrangements and their specific dynamics.

How Franchises Work

Franchising methods vary depending on the industry and business type. Below are examples of how franchising operates across different sectors:

Industrial
Common in industries like restaurants, this model involves the franchisor providing not just the license and brand but also production techniques and technologies. The franchisee operates as part of a network, producing and distributing goods under the franchisor’s guidelines.

Distribution
In this arrangement, the franchisee receives knowledge and commercial techniques to sell products. In return, they pay the franchisor an initial entry fee or ongoing royalties to access the franchise’s established systems and resources.

Services
Focused on selling services rather than products, this model is widely used in sectors such as travel and consultancy.

Organisational Models
Franchises can also be structured based on how the franchisor and franchisee collaborate:

  • Direct: The franchisor partners with local operators to establish a brand in a foreign market, particularly where the brand is already well-known.
  • Indirect: The franchisor involves a third-party investor who assumes the financial risks and responsibilities, often used for culturally or geographically distant markets with complex distribution needs.

Franchising benefits both parties. The franchisor expands their network and brand presence without managing physical locations, while the franchisee leverages a proven business model to reduce the risks of starting a new venture, even without industry experience.

How to Open a Franchise: Costs to Consider

Starting a franchise requires evaluating both operational and financial commitments. While franchisors provide significant support—ranging from skills transfer to operational compliance—there are specific costs involved:

  • Entry Fee: A one-time fee granting the franchisee the right to join the business.
  • Turnover Percentage: A share of profits, often paid periodically or for the entire duration of the partnership.
  • Advertising Contribution: A fee to support national or local marketing campaigns initiated by the franchisor.
  • Additional Costs: This may include expenses for tools, equipment, or bank guarantees for securing goods.

MBE Franchising: A Global Network

MBE’s franchising system offers internationally negotiated agreements, enabling franchisees to overcome challenges through effective teamwork and constant operational support.

With over 1,600 service centres worldwide, joining MBE provides access to a global network of entrepreneurs.

Franchisees benefit from extensive assistance, training, support, and potential financial advantages.

By partnering with Mail Boxes Etc in the UK, you gain the tools to establish a successful business while contributing to the shared achievements of a thriving global network.

Open a new MBE Center

Mail Boxes Etc./MBE Centers are operated by independent operators as franchisees, who operate under a franchise agreement under the brand name of MBE. Through its franchise network Mail Boxes Etc. provides support services for businesses and individuals. Logistics and shipping services represent the main services of MBE – enabled by MBE through contractual agreements concluded for the benefit of its franchisees with the main domestic and international express couriers - and other graphics and printing services - provided either directly or on the basis of agreements with large printing centers. The promotion of services for business and private customers is carried out in the framework of the business activity of each MBE franchise partner within and outside of the MBE Centers ("farming"). Each franchise partner is contractually obligated to perform such activities. Mail Boxes Etc. and MBE are registered trademarks used with permission of Fortidia - a registered trademark of MBE Worldwide S.p.A - (All Rights Reserved). The services offered by the individual MBE Centers can vary depending upon the location. The material available on this Internet site, the information contained herein and any other relevant related data may not in any manner be copied, distributed, changed, republished, reproduced, downloaded or forwarded to third parties, without the expressed prior written authorization of Sistema Italia 93 S.r.l. We accept no responsibility with regard to the unauthorized use of the material available on this Internet site, the information and/or the data contained herein.