An Inside Out Of the Franchise Model

Well you must be all aware of the Starbucks coffee. You must have seen or had a cup of coffee in one of their coffee shop. Also you have seen Mcdonalds and other joints like them at many places. Many of us must be having an idea that it’s the company that is opening its outlets at various places in order to grow their business. Yes the company is expanding its business alright but it’s not the owner of all the branches that are running under its banner. Wondering what is that! Well it is basically a franchise model or setting up a franchise to improve the revenue generation.

How Business Franchising Works?

Now you must be wondering what is franchise model. It is basically offering someone to run your business to someone else under your banner of your brand name. In this, there are two parties involved, the franchisor and the franchisee. In this the type of business the franchisor takes a predetermined amount from the franchisee as an agreement between the two parties. In return the company letting out the franchisee gives permission to use their brand name and also gives support to build the setup of the franchise that the other party has taken. The only thing franchise has to do is arrange the capital for investment and other technical specifications required by the franchisor. Once the business starts, both the parties take up the part of the promotion and other marketing strategies for business growth. The main mother companies take a fixed percentage of amount as royalty from the franchisee as agreed from between both the both the parties. In this way, both the franchisor and the franchisee keep their money ball rolling.

The model of franchise has grown and flourished a lot in few years time and it has been particularly explored and capitalised mainly by the startup business houses. Eating joints and playschools have found a good volume of business by setting up a franchise. The investment part varies upon the kind of franchisee you are taking and the investment limitation set by the mother company. It ranges from lakhs to millions which you can take depending upon the type of capital you have. It is indeed a good business opportunity for the small houses and also for the new entrepreneurs who want to start something of their own independently.

However it is better to do a good market survey and also a little socio-geographical study before you take up any kind of franchise or give any kind of franchise. Royalty fees can be a little tricky so it should be crystal clear between both the parties before signing an agreement. If you are giving out franchisee then marketing your brand name is the foremost important thing. Contract signing duration should also be clear to avoid any kind of dispute and renewal clause must be taken care of. Franchisor has the power to revoke the agreement if the franchisee is found violating the contract terms on any grounds. 

Bottom Line:

Proper marketing...we repeat... proper marketing is necessary for the growth and development of any franchise model. With amicable coordination and planning, both the franchisor and franchisee can benefit in a huge way and flourish their business by setting up a franchise.