What is a franchise? A guide for small business owners in Ireland

Published Friday 5 June 2026

Table of contents

• What is a franchise?
• How do franchises work?
• Types of franchises
• Franchise examples by industry
• Advantages and disadvantages of franchising
• How much does it cost to start a franchise?
• How to buy a franchise
• Franchise vs starting your own business
• Due diligence is key
• Manage your franchise finances with Xero
• FAQs on franchises

Key takeaways

• A franchise is a licensing-based business model where a franchisor grants a franchisee the right to operate under its brand, systems, and processes in exchange for fees and royalties.
• Franchising offers a faster route to business ownership with a proven concept, training, and ongoing support, but it comes with higher startup costs and less operational control.
• Franchise costs vary widely, with initial fees typically ranging from €10,000 to over €250,000 depending on the brand, plus ongoing royalties of 4–12% of revenue.
• Thorough due diligence is essential before buying a franchise. Review the franchise disclosure document, seek independent legal and financial advice, and speak to existing franchisees.

What is a franchise?

A franchise is a licensing-based business model where a brand owner grants another person or company the right to sell its products or services using its name, systems, and processes. It's one of the most popular ways to start a business with a proven track record.

What is a franchisor?

The franchisor is the company that owns the brand and business model. It's their job to provide franchisees with the tools they need to succeed.

Besides providing the brand name, the franchisor typically supplies access to its supply chain, documented processes, management advice, and marketing support. A strong franchisor will have a well-tested system that helps new operators get up and running quickly.

What is a franchisee?

The franchisee is the person or company that buys the right to operate under the franchisor's brand. You'll run your franchise as a separate, independent business.

As a franchisee, you'll pay franchise fees, follow the franchisor's operating standards, and meet reporting requirements. You may also need to register a company with the Companies Registration Office in Ireland, depending on your chosen structure.

How do franchises work?

Franchises work through a formal agreement between the franchisor and franchisee. This agreement sets out rights, responsibilities, fees, and the terms of the business relationship.

The franchise agreement

The franchise agreement is a legally binding contract. It covers how long you can operate the franchise, the territory you're assigned, and what's expected from both parties.

Most franchise agreements run for five to 20 years. They'll typically include renewal terms, performance targets, and conditions for ending the arrangement. Always have a solicitor review the contract before you sign.

Fees and royalties

You'll pay an upfront franchise fee to join the network. This one-off payment covers the right to use the brand and access training, systems, and support.

On top of that, you'll pay ongoing royalties. These are usually calculated as a percentage of your revenue, typically between 4% and 12%. Some franchisors also charge a separate marketing levy to fund national or regional advertising.

The franchise disclosure document

Before signing, you should receive a franchise disclosure document. This provides detailed information about the franchisor's financial health, the franchise network's performance, fees, obligations, and any litigation history.

While Ireland doesn't have specific franchise legislation like the United States, the Irish Franchise Association promotes best practice standards. A reputable franchisor will provide full disclosure voluntarily.

Types of franchises

Not all franchises work the same way. The two main types are business format franchising and product distribution franchising.

Business format franchising

This is the most common type. The franchisor provides a complete business system, including branding, operations manuals, training, marketing, and ongoing support. You follow a tested playbook to run the entire business.

Most restaurant, retail, and service franchises use this model. It gives you a clear framework for day-to-day operations.

Product distribution franchising

In this model, you sell the franchisor's products but have more freedom in how you run your business. The franchisor focuses on manufacturing and supply, while you handle sales and distribution.

Car dealerships and soft drink bottlers are classic examples. You'll benefit from brand recognition but won't receive the same level of operational support as a business format franchise.

Franchise examples by industry

Franchises exist across a wide range of industries. Here are some of the most common sectors where franchise models thrive.

Food and beverage

Food franchises are among the most recognisable globally. Brands like Subway, McDonald's, and Supermac's (an Irish success story) operate through franchise models. These typically require significant investment but benefit from strong brand recognition.

Retail

Retail franchises range from convenience stores to specialist shops. Examples include Spar, Centra, and The Body Shop. You'll sell established products with proven demand.

Hospitality

Hotel and accommodation franchises include brands like Premier Inn, Travelodge, and Choice Hotels. These require substantial capital but offer established booking systems and brand loyalty.

Services

Service-based franchises cover cleaning, landscaping, pet care, fitness, and home maintenance. Brands like Mr. Handyman and Snap Fitness are examples. These often have lower startup costs than food or hospitality franchises.

Professional services

Professional services franchises operate in areas like accounting, tax advisory, recruitment, and IT support. These suit people with industry expertise who want a proven business framework around their skills.

Advantages and disadvantages of franchising

Franchising can speed up your journey to business ownership. But it's not without risks. Here's a balanced look at the key pros and cons.

Advantages of a franchise

Franchising has clear benefits, especially if you want to reduce the risk of starting from scratch.

• Proven business model: you're buying into a concept that's already succeeding. The franchisor has tested and refined the approach, which reduces your risk compared to starting from scratch.
• Brand recognition: customers already know and trust the brand. This can make attracting your first customers much easier than building a name from nothing.
• Training and support: most franchisors provide initial training and ongoing guidance. This can include operations manuals, marketing materials, and even help with site selection.
• Established supply chain: you'll often benefit from the franchisor's supplier relationships, which can mean better prices and reliable stock.
• Higher success rates: franchise businesses tend to have higher survival rates than independent startups.

Disadvantages of a franchise

There are also trade-offs to consider before committing to a franchise.

• Higher startup costs: franchise fees add to your initial investment. You'll also need to meet brand standards from day one, which means spending on fit-out, equipment, and sometimes uniforms.
• Ongoing fees: royalty payments and marketing levies reduce your profit margins. These are due regardless of how well the business is performing.
• Limited control: you'll need to follow the franchisor's rules on products, pricing, branding, and operations. If you want full creative freedom, franchising may feel restrictive.
• Staffing from the start: many franchises require you to hire staff immediately. That means managing payroll and employment obligations from the outset.
• Dependency on the brand: if the franchisor's reputation suffers, your business can be affected too, even if your own operations are strong.

How much does it cost to start a franchise?

Franchise costs vary enormously depending on the brand, industry, and location. It's important to understand the full financial picture before committing.

Initial franchise fees

The upfront franchise fee gives you the right to operate under the brand. For smaller service-based franchises, this can start at around €10,000 to €20,000. Well-known food and retail brands can charge €100,000 to €250,000 or more.

Ongoing royalties

Most franchisors charge ongoing royalties of 4–12% of your gross revenue. Some also charge a marketing fund contribution of 1–3%. These fees are typically paid monthly or quarterly.

Setup and working capital

Beyond the franchise fee, you'll need to budget for premises, fit-out, equipment, stock, insurance, and working capital to cover expenses until the business becomes profitable. Total startup costs, including the franchise fee, can range from €30,000 for a low-cost service franchise to over €500,000 for a major restaurant brand.

Make sure you have a detailed business plan that accounts for all these costs. Build in a buffer for unexpected expenses during your first year.

How to buy a franchise

Buying a franchise is a significant decision. Following a structured process will help you find the right opportunity and avoid costly mistakes.

1. Research the market

Start by exploring which industries and franchise brands interest you. Look at franchise directories, attend franchise expos, and read industry publications. Consider which sectors align with your skills, experience, and financial resources.

2. Assess your finances

Work out how much you can afford to invest. Factor in the franchise fee, setup costs, working capital, and living expenses while the business gets established. Use accounting software to model different financial scenarios.

3. Request the franchise disclosure document

Ask the franchisor for full disclosure of fees, obligations, performance data, and litigation history. A trustworthy franchisor will share this information openly. If they're reluctant, treat that as a warning sign.

4. Talk to existing franchisees

Speak to current and former franchisees about their experience. Ask about the quality of support, the accuracy of financial projections, and whether they'd make the same decision again. This is one of the most valuable steps in your research.

5. Ask the tough questions

Don't hold back when evaluating a franchise opportunity. Here are some questions worth asking the franchisor.

• Can you share sales, revenue, and growth reports for the whole network?
• What do new franchisees spend in their first year, and when do they typically break even?
• What are the most common challenges for new franchisees?
• Will you commit to giving exclusive access to a defined territory?
• What systems do you provide for inventory management, accounting, and payroll?
• What happens if either party wants to end the agreement early?

6. Get independent advice

Hire a solicitor experienced in franchise law to review the agreement. Engage an accountant to assess the financial projections. This investment in professional advice can save you from a costly mistake.

7. Secure financing

Once you're confident in the opportunity, arrange your funding. Options include personal savings, bank loans, and government-backed supports. Your local enterprise office can advise on available schemes.

8. Sign the agreement and get started

After completing your due diligence, sign the franchise agreement and begin the setup process. Work closely with your franchisor during the early stages to make the most of their training and support systems.

Franchise vs starting your own business

Choosing between a franchise and an independent startup depends on your goals, budget, and appetite for risk. Both paths have distinct advantages.

Risk and success rates

Franchises generally carry less risk because you're working with a proven model. Independent startups offer more freedom but face higher failure rates, particularly in the first three years.

Cost comparison

Franchises typically cost more upfront because of the franchise fee. However, an independent business may end up costing more in the long run if you need to invest heavily in branding, systems, and trial-and-error product development.

Control and flexibility

If you want complete control over your brand, products, and strategy, starting your own business is the better fit. With a franchise, you'll follow the franchisor's playbook, which limits your ability to innovate or pivot.

Support and training

Franchises come with built-in support structures. As an independent business owner, you'll need to source your own mentors, advisors, and training. Organisations like your local enterprise office can help bridge that gap.

Time to profitability

Franchises can reach profitability faster because of their established brand and systems. Independent businesses often take longer to build a customer base and refine operations.

Due diligence is key

Thorough due diligence can be the difference between a successful franchise investment and a costly mistake. Take your time and investigate every aspect of the opportunity.

Your due diligence checklist

Before committing to a franchise, work through these essential checks.

• Review the franchise disclosure document: examine the franchisor's financial statements, fee structures, and any history of disputes or legal action.
• Analyse the financials: create your own financial projections based on realistic assumptions. Don't rely solely on the franchisor's figures.
• Visit existing franchise locations: see the business in action. Observe customer flow, staff morale, and product quality firsthand.
• Check the territory terms: confirm what exclusivity you'll receive. Make sure the franchisor can't open a competing outlet nearby.
• Understand the exit terms: know what happens if you want to sell the franchise or leave the network early.
• Verify the franchisor's track record: research how long they've been operating, how many franchisees have left, and why.

Practical tips

Keep detailed records of every conversation and document you receive from the franchisor. Set up expense tracking from the start so you can monitor costs during your research phase and beyond.

Talk to at least three existing franchisees before making your decision. Ask for references and also seek out franchisees who aren't on the franchisor's recommended list. Their perspective may be more candid.

Manage your franchise finances with Xero

Running a franchise means managing franchise fees, royalty payments, staff wages, and everyday expenses alongside your regular business operations. Clear visibility over your finances is essential to staying profitable.

Xero's cloud accounting software helps you track cash flow, automate invoicing, manage payroll, and stay on top of your obligations to both the franchisor and Revenue. With everything in one place, you can spend less time on the books and more time growing your business. Get one month free.

FAQs on franchises

Here are answers to some frequently asked questions about franchises.

What is the difference between a franchisor and a franchisee?

The key distinction is legal and financial independence. A franchisee is a separate legal entity from the franchisor, which means you carry your own liability and financial risk. If the franchisor or another franchisee in the network struggles financially, your business is legally separate.

How much does it cost to buy a franchise?

Beyond the franchise fee itself, many first-time franchisees underestimate the working capital needed to cover expenses before the business becomes profitable. Budget for at least six months of operating costs on top of the franchise fee and setup expenses. Some banks in Ireland look more favourably on franchise loan applications than independent startup applications, so explore your financing options early.

What are the main advantages of buying a franchise?

One often-overlooked advantage is access to the franchisor's purchasing power. Because the network buys supplies in bulk, you'll typically pay less for stock and materials than an independent business would. This can make a real difference to your margins, especially in the early months when cash flow is tight.

What is a franchise disclosure document?

If a franchisor is reluctant to provide a disclosure document, treat that as a serious warning sign. In Ireland, there's no legal requirement to provide one, so a franchisor who shares it voluntarily is demonstrating transparency. Always have your solicitor review the document before you commit.

How do franchise royalties work?

Royalties are calculated on gross revenue, not profit, which means you'll owe them even during months when the business makes a loss. Before signing, check whether your franchise agreement includes any grace period on royalty payments during the initial ramp-up phase. Also clarify how marketing levies are calculated and what you get in return.

What is the difference between a franchise and a chain?

A chain is owned and operated by a single company across all its locations. A franchise network is made up of independently owned businesses that operate under the same brand. Each franchisee is a separate legal entity from the franchisor.