Do you want to open a franchise? Frequently heard this term but was unsure of how to apply it. This comprehensive guide will explain what a franchisor is, the benefits and drawbacks of doing so, how to franchise your company in India right now, and other information on franchising in India.
Who is a Franchisor?
Franchises are contracts that allow one company to give another the right to use its brand, operating system, and other proprietary assets to market its products and services.
The trademark will be sold by the original business or an established one. The local business owner who purchases these rights is referred to as a “franchisee,” and the brand-new company is referred to as a “franchise.”
Understanding What Being a Franchisee in India Means
The initial franchise fee, an annual fee, and a percentage of the branch’s sales are typically the three payments provided to the franchisor. It may also involve additional service charges.
Being a franchisor has advantages and disadvantages, but overall, it is a viable business option, particularly for big, established organizations. Fundamentally, a franchisor-franchisee relationship is one between an advisor and an advisee.
Here’s your role of you as a franchisor:
- The franchisor provides continuing guidance and support with fundamental business decisions, such as selecting and training staff, setting up shop, advertising products, obtaining supplies, etc.
- Once the partnership has been created and mutual success has been attained, the franchisor’s duty as a mentor continues.
- Some franchisors keep a closer eye on their franchisees than others to make sure they respect the parent company’s standards, quality, and values.
Benefits of Franchisor
Let’s now consider the advantages of a franchisor in India.
1. Opportunities for Growth
By utilizing the knowledge of franchisees in particular areas, global firms commonly employ franchising to expand their presence in new countries around the world.
The franchisee is given the responsibility of regional or global expansion and the authority to grant further franchises to other companies by the franchisor company.
Franchisees pay franchise fees and royalties in return for the right to use the franchisor’s tried-and-true business model, market leadership, and brand name.
2. Increased Market Share
Franchising is a terrific way for a company to increase market share with little to no additional expenditure while also establishing a presence in new markets. Franchisees must pay the overhead expenses of running a business, such as payroll because they are also business owners and have a vested stake in the success of their locations.
Lower operational costs can nevertheless increase franchisees’ total profitability even if individual franchise sites make less money than they would if they were part of a bigger chain.
3. Scalability
Depending on the demands, resources, and production objectives of the organization, franchise agreements can be designed for high-volume national expansion or low-volume regional expansion.
4. Additional Revenue Sources
An additional source of income for a franchisor is the ongoing royalties that franchisees pay. Royalties may include a number of payments in addition to the initial startup cost and a monthly fee calculated as a percentage of the franchisee’s gross sales, depending on the specific terms of the franchise agreement.
Disadvantages of a Franchisor
Each business has unique advantages and hazards. After examining the advantages of opening a franchise in India, it is now time to comprehend the drawbacks.
1. Capital Investment
Starting a franchise requires a significant time commitment as well as financial resources. Every franchisor must pay for the development of the business, the opening of a flagship site, the drafting of legal documents, the development of marketing and packaging plans, and the recruitment and training of franchisees.
2. Risk of Failure
Even if the franchisor has done its due investigation, a franchisee may end up being a poor fit for the business for a variety of reasons, such as being careless, challenging to work with, or unable to properly run a business. There are other circumstances in which the franchise might experience a loss. Even though the business idea is tested and true, buying a franchise still carries some risk.
3. Loss of control
Franchisees initially sign contracts pledging to follow their franchisors’ rules covering training, conduct, and other issues. However, as the novelty wears off, this might not be the case.
Given that franchisees are real individuals with their own opinions and personalities, disagreements are unavoidable. A franchisee may have a difficult or stubborn attitude, or they may find it difficult to make adjustments as quickly as the franchisor had hoped.
4. Legal and Regulatory Costs Can Be Expensive
If a franchisee refuses to cooperate or otherwise proves to be a poor choice, legal action may be necessary; this can be expensive and harmful to a franchisor’s reputation among other franchisees.
Additionally, due to state and federal laws governing franchisees, an attorney’s services are required for the Franchise Disclosure Document (FDD) and other regulatory filings.
How to franchise your company in India – How to start a franchise in 6 simple stages
Franchises are the finest way to grow your business over all of India. Additionally, it’s a wonderful way to increase your revenue. Offering a franchise entails giving a share of your company to an unidentified person. It is essential to look into the franchisee’s past for this reason.
Here are six easy steps to franchise your business in India.
1. Standardisation
The act of consistently achieving identical results is referred to as “standardization”. Customers will enjoy the same consistent product flavor across all franchise sites thanks to this.
2. Ensuring a proper distribution network
Since the franchisor must guarantee uniformity across all outlets, it is crucial to have an appropriate distribution network, which will help to ensure the same goods and services are offered in each location.
3. Have a proper support team
A capable team must assist the potential franchisee. They will give the potential franchisee advice regarding the franchise’s background, prior successes, financial needs, and future returns.
4. Marketing Strategy
The franchisor needs to be very active on social media and in online activities. The franchisor needs to set aside some money for franchise system promotion.
Key Takeaways: The Franchisor’s Role in the Indian Franchising Industry,
- Franchises are contracts that allow one company to give another the right to use its brand, operating system, and other proprietary assets to market its products and services.
- Multinational firms typically use franchising to expand their presence globally since it enables them to take advantage of franchisees’ in-depth knowledge of local markets.
- A franchisor must set aside money for operational expenses, research and development, a flagship site, the production of legal documents, marketing and packaging plans, franchisee recruitment and training, and legal fees.
- Due to state and federal regulations governing franchises, the Franchise Disclosure Document (FDD) and other regulatory forms must be prepared by an attorney.
- The terms of the franchise agreement often do not provide franchisees with any protection from the bankruptcy of their franchisor.
Franchise Your Business FAQs
1. How can I become a franchisor of my own business in India?
Once you’ve determined that your company is profitable and you want to grow it across the nation, you may become a franchisor of your company by putting the right planning and strategy in place.
2. Why would a business choose to franchise in India?
The majority of business owners decide to franchise because it offers quick expansion with less risk of debt or requirement for equity capital. Franchises enable companies to grow without having to put up their own capital because the franchisee is in charge of raising all beginning funds for a location.
3. When should a company in India think about using the franchising model?
Only companies that have been in operation for at least a year and a half are normally accepted by franchises. Nevertheless, depending on the industry, that number could be either larger or lower than stated. For some firms, franchising might be beneficial during the first two years of operation.
4. Is franchising beneficial for Indian small businesses?
Franchises are more likely to succeed than other business models, however, this does not always equate to larger profitability. Naturally, the higher success rate will result in larger franchise fees for you. A franchise can be your best choice if you don’t have much experience in the business field.
In conclusion,
whether or not you decide to franchise should depend on how committed you are to the process.
It would be reckless for privately held businesses to disregard franchising as a potential development and expansion strategy. However, not every business can use franchising as a strategy for expansion. There are a few things you should be aware of before considering franchising as a business venture.
For information on how to franchise your business in India, contact Regional To Global. Our franchising knowledge has aided numerous firms in expanding both locally and internationally.
