The definition of franchising is “the practice of using another person’s business model”.  Basically, an entrepreneur (franchisor) has the right to distribute techniques, products and trademarks with the agreement that they will give a percentage of their gross monthly sales along with a royalty fee.  The percentage of profit goes to the owner of the business.  Agreements can last anywhere between five and thirty years and can be cancelled at any time.

As of 2009, there are ten franchises that have become the most famous and profitable.  These businesses are: Subway, McDonald’s, Liberty Tax Service, Sonic, InterContinental Hotels, Ace Hardware, Pizza Hut, UPS, Circle K and Papa John’s.

Subway, the highest ranking franchise so far, has had its profits increasing dramatically since 2005.  Franchises keep increasing and they’re still looking for good locations.  Subway wants to place franchises in all fifty states.  They are also looking for worldwide locations.  Subway supports organizations such as the American Cancer Society, Habitat for Humanity, Girl Scouts of America and the National Foundation for Teaching Entrepreneurship.

The third highest ranking franchise, Liberty Tax Service, has been offering its services since 1997.  The company originated in Canada and, from there, John Hewitt took over and brought it to America.  Liberty Tax Service currently desires franchises in all fifty states.  They would also like businesses in New Zealand, Australia and Canada.  As of 2005, they offer tax free service for volunteers who help young individuals.

The advantages of owning a franchise are numerous.  Franchising is the only way to get venture investment capital without giving up control of the operation.  Franchisors can expand their business any place possible.  Franchising is also a way to feel independent and have the right to say you own your own business.  Franchisors can employ residents and earn even more money.

Franchising has disadvantages, such as a limited pool of viable franchises.  Cities or towns may only have a limited amount of prospects.  Also, while franchisors have good control over the business, they don’t have complete control.  Even though one individual may have started the franchise, they can be replaced if they prove incompetent.  There are a few other disadvantages that come along with owning a franchise but vary for every situation.

When becoming a franchisor, be sure to watch markets carefully and choose wisely.  It may be fun and exciting to start a business with McDonald’s but, if not watched closely, the entire plan could go under.