What Is a Franchised Dealership?

by Susan Ayers; Updated September 26, 2017
What Is a Franchised Dealership?

Franchises have been around for centuries. Entering into a franchise means you will use and practice business methodologies of the franchisor. By entering into a dealership franchise as an independent contractor or franchisee, you are granted the rights to distribute the franchisor's inventory whether it is a car, motorcycle or boat. The franchising company receives a percentage of sales and a royalty fee. As with any business arrangement, there are both benefits and drawbacks to owning a franchised dealership.

Training and Support

Training and support are available to dealership owners by the franchisor. This will often help the independent contractor from having to reinvent the wheel as effective training and support options have already been developed and proven effective.

Advertising

Advertising has already been created and independent contractors can benefit from using the franchisor's advertising programs. Having brochures, signs and mailings already developed can save a new dealership time and money.

Existing Infrastructure

Benefiting from a company that has a developed infrastructure will give peace of mind to an independent contractor. It is much easier to investigate and learn from a company that has been in business for a period of time, instead of starting a business from the ground up.

Negotiations

Having the ability to negotiate the purchase price and financing options of an existing franchise is attractive to an independent contractor.

Royalties

Paying royalties or expensive operation costs for equipment and insurance may be a deterrent to owning a dealership franchise. Some franchisors require the dealership franchisee to pay them weekly or monthly percentages of their gross income in exchange for using the main dealership name.

Control

Controlling the daily operation of a business is one of the main reasons people decide to start a business. Owning a franchise sometimes means that the operation is up to the franchisor and the franchisee must follow the rules already set in place. Freedom to change the appearance of a franchise is limited, depending on the regulations instituted by the franchisor.

About the Author

Based in Richmond, Va., Susan Ayers is a senior learning associate for a financial organization. She previously developed web-based training for Circuit City and spent a number of years creating eLearning courses for a not-for-profit law enforcement organization. Ayers graduated magna cum laude with a Bachelor of Arts in English from Virginia Commonwealth University and holds a master's in education from St. Joseph's College.

Photo Credits

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