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Franchising or buying a company

Franchising or buying a company

Instead of starting a new business from scratch, you can pay for the right to use the business concept and brand of an established company. This is called franchising.

A franchise system consists of a franchisor and a number of franchisees, whereby the franchisor leases its brand and operating methods to the franchisee. As a franchisee, you are bound to run the business in a certain way so that the whole chain is run consistently. For the franchisor, franchising is a way of expanding the business.

What does franchising mean for you?

For you as an entrepreneur, franchising is an opportunity to benefit from an existing brand and a working business concept. For a fee, a franchisee gets to join a ready-made organisation. Franchising is based on a partnership between two independent parties. You run your own business and are independent in terms of ownership.

Starting a business through franchising is a way to get started quickly. In addition to a ready-made brand, you get training and economies of scale (for example, in purchasing and marketing). The disadvantage is that you have to give up your entrepreneurial freedom, as you will probably have to follow the uniform concept of a franchise. Be sure to check the agreement to see what applies. You also have to expect a lot of hard work and hustle right from the start.

What does it cost?

In some franchise chains, you pay a joining fee. The amount varies, depending on how well-known the company name is and how profitable it is. You then pay an ongoing fee, usually determined by the turnover of the company or shop.

Planning your start-up

You should plan your start-up as carefully as if you were starting a brand new business. Making a business plan will help you to plan and describe how you will implement your business concept so that you have clear goals for your business.

How to write a business plan

It may also be interesting to make a comparison between the projected income and costs as a franchisee and the projected income and costs as an independent business owner. This is important, inter alia, in order to decide whether the business can generate the profit you want and whether the franchise agreement is reasonable in your circumstances.

Register your company

Like all business owners, a franchisee must register the company and learn about matters such as accounting, taxes and insurance. It is common for the franchise agreement to regulate the form of business in which you can operate. The franchisee will often be required to start up a business in a form that constitutes a legal entity, such as a limited company or trading partnership.

Choose business type

Benefit from the experience of others

It may be useful to contact other franchisees in the same chain to find out more about how the agreement works in practice and how the relationship between franchisor and franchisee works. Consider approaching franchisees who operate under similar conditions to you. These conditions may vary depending on whether you are operating in a large city or in a small town, or on the competition in the sector.

Advice and tips on franchising from the Swedish Franchise Association (in Swedish)