Franchise

A business model for expanding across multiple geographies while keeping your brand’s reputation

A franchise is a sort of license that allows a franchisee to sell a product or service under the franchisor’s brand name by giving them access to the franchisor’s unique business expertise, procedures, and trademarks. The franchisee normally pays the franchisor an initial start-up cost as well as annual license fees in exchange for obtaining a franchise.

When is Franchising done?

A company may franchise its product and brand name if it wishes to expand its market share or geographic reach at a reasonable cost. A franchise involves a franchisor and a franchisee forming a partnership. The franchisor is the company that started it all. It offers to sell the right to utilize its name and concept. This right to sell the franchisor’s goods or services under an existing business model and trademark is purchased by the franchisee.

Franchises are a popular option for entrepreneurs to establish a business, particularly in a competitive market like fast food. One of the biggest benefits of buying a franchise is that you get access to a well-known brand. You won’t have to pay money to get your name and product in front of customers.

Franchising has resulted in economic growth, brand extension, and job creation in India. When it comes to the Indian market, a number of local and international companies are successfully functioning in a variety of areas through franchise business structures. McDonalds, Baskin Robbins, Domino’s, KFC, Subway, Khadim’s, Kidzee, Lakmé Salon, Pizza Hut, and 7 Eleven are just a few of the well-known companies expanding through the franchise business model. Dixy Chicken, EuroKids, Kazari Apparels, THANCO Fresh Fruitz Ice Cream, Pizza Corner, and many others are some of the most popular franchise options.

While franchising is a popular approach for small and large businesses to develop, it is a flexible method, with each franchise business operating differently. Furthermore, it implies that franchising prospects can be classified according to the aspects that are involved, such as business strategy, franchisee involvement, investment, operational assistance, marketing and promotion, and so on. More recently, most brands have chosen one of three types of franchise business strategies for expansion:

Franchise Business Model

Most of the largest franchise brands, such as Burger King, Nike, and McDonald’s, are expanding using this approach. The link between a franchisor and a franchisee is stronger in this model than in the others. The franchisee benefits from the model since it offers a wide range of services from the franchisor. Franchisors assist franchisees with marketing, training, operating, production, advertising, strategic planning, and quality control. To give support, the structure also includes help from the franchisor with staffing and organizing day-to-day marketing operations at the local level.

The Product Distribution Franchise

This is the most traditional form of franchising. A franchisee has the right to distribute the manufacturer’s products under this model. Franchisees must pay for the use of franchisors’ or manufacturers’ trademarked items. In addition, unlike the typical franchise business model, the franchisor does not provide ongoing support to the franchisee. The product distribution franchise model is more prevalent in the manufacturing and automobile industries, and companies such as Samsung, Apple, and others are using it to expand their businesses.

The Manufacturing Franchise

In most cases, the franchisor is a manufacturer that grants the franchisee or dealer the rights to manufacture and market its products in a designated territory. Coca-Cola is a well-known brand in this market.

COCO, FOCO and FOFO- The Buzzing Models

Apart from the aforementioned models, rising businesses are adopting the Franchisee Owned Company Operated (FOCO), Company Owned Company Operated (COCO), and Franchisee Owned Franchise Operated (FOFO) models to expand their footprint in the country more swiftly. They all, however, merely copy the business model of a well-known company.

According to survey, Franchising has grown at a rate of 30-35 percent per year for the past four to five years, with a total turnover of roughly INR 938 billion. Currently, the sector contributes roughly 1.8 percent of India’s GDP, and by 2022, it is expected to contribute around 4%.

FRANCHISING BUSINESS

Most entrepreneurs who have been successful in starting a franchise want to grow their firm soon after. Expanding a franchise usually entails paying a fee to the franchisor or the owner of a current franchise with which you want to affiliate.

The franchising business is a bilateral business in which the franchisee’s success has a direct impact on the franchisor’s success, and the franchisor’s failure has a reversing effect on the franchisee’s business. As a result, the partnership is extremely dependent on one another.

If you want to grow your business by buying an existing franchise, you’ll need to investigate the new firm thoroughly and go through the procedure with caution. Begin by examining the company’s financial situation, assessing its development prospects, and determining whether you can increase its efficiency. You want to protect your ongoing business from any potential obligations.

The first inputs, which include preparing the locations, obtaining funds, consulting with a lawyer, and employing personnel, are all part of the approach.

Some of the criteria

• Allow for natural expansion rather than investing significant sums of money to expand your business. To begin with, they will look to be a very profitable strategy to expand. This is unnatural growth, which could be harmful in the long run. First, build your brand and reputation, and then let the business grow organically, even if it takes a long time.
• Make your company concept foolproof by testing it in your first location and attempting to make it flawless. Consider the following questions: Is my business scalable and economically viable? Individual location growth or stagnation might assist you find the solution to your inquiries. This assessment will help you achieve future success.
• Persist in maturing—this will be determined by the contributions of your customers as well as your marketing, technology, and business strategy. Make an effort to build your company in such a way that you are a powerful rival in the sector. As a result, begin with a solid business model.
• Select franchisees carefully—franchisee selection can have a significant impact on a company’s success or failure. As a result, choosing wisely is the starting point. Ensure that the franchisee candidate has a strong entrepreneurial spirit as well as the requisite financial and commercial competence to succeed. You are confident that they will maintain exceptionally high standards, based on your assessment. Look for multi-tasking franchisees who are courageous and imaginative.
• After the initial time of familiarization has passed, keep in touch at regular intervals. Owners who are also visionaries need to be informed about their franchisees’ continuous actions and progress. This assistance will contribute to the brand’s growth and success.

Franchisees do not consider franchise expansion as a cost of doing business, but rather as a source of revenue. They are focused on expansion and use multiple-unit and multiple-brand franchising to achieve it.

Expanding Your Business Through Franchising Has Several Advantages Over Opening Company-Run Units

If you have a successful business and want to grow it, the greatest choice is to open a franchise. By forming a franchise, many firms today may boost their market share and expand into new sectors.

In recent years, franchise establishments are expected to rise by 1.9 percent. The sector’s gross domestic product is expected to rise by 6.1 percent to $451 billion. The output of franchise businesses would rise by 6.2 percent to $757 billion.

Growing a firm through franchising is a more cost-effective option. Here are three compelling reasons to franchise your company.

Lower cost

Lack of access to cash is the most prevalent impediment to expansion for today’s small enterprises. Creating a franchise delivers the same fulfilling experience as starting a business on your own, but it costs less to get started.

Business owners might develop franchises to bypass the trouble of obtaining financing and investors. Franchisees put their own money into the firm and assume all of the risk. As a result, a franchisor does not need to raise as much money to start a new branch.

Better Management

Many business owners rely only on themselves. You will have to give control to others regardless of how you build your firm. Many entrepreneurs confront difficulties in finding and retaining effective unit managers.

Franchisees make excellent leaders. Franchise branch managers bear operational risk because they are personally invested in the company and must assure its success. Business owners can benefit from the wealth of information and experience available.

Faster Expansion

It’s all about reproducing a proven and profitable company technique in franchising. Because of the pre-existing strong economic basis, establishing a franchise will jumpstart your expansion considerably faster than establishing company-owned units. Franchising helps small enterprises to compete with much larger corporations, allowing them to saturate marketplaces before they can respond.

Both the franchisor and the franchisee benefit from franchising. Many managerial tasks, such as selecting a new location and hiring people, must be completed when opening a new branch. Franchisees, on the other hand, will be responsible for this responsibility. As a result, franchised networks can grow faster than company-run networks.

Regional to Global: Helping brands to franchise efficiently and successfully

Development

When you decide to seek development through franchising, you’ll need to ensure that your brand has the operations and infrastructure in place to fulfil demand. We will walk you through the process and connect you with people who can assist you. We will also assist you in connecting with crucial contacts in the franchising sector.

We then assist you in identifying and vetting high-quality candidates who fit your brand’s culture, personality, and criteria. This approach entails effectively educating potential owners about the unique opportunity presented by your business. You may rest assured that if they choose to become a franchisee, it will be the best fit for them in every way.

Strategy

The number of franchisees under a franchise brand’s umbrella has little to do with its performance. As you expand regionally or nationally, we engage with you to build a long-term strategy. This will allow you to focus on high-level growth while keeping your brand consistent across geographies.