ranchising is a business model that allows individuals to own and operate their own
business using the branding, processes, and support of an established company or
brand. Here’s a more detailed breakdown:
- Franchisor and Franchisee: In franchising, there are two main parties involved:
- The Franchisor: This is the original or existing company or brand that
wants to expand its presence. The franchisor owns the rights to the name,
the business model, and the operating processes.
• The Franchisee: This is the individual or entity that acquires the right to
operate under the franchisor’s brand. In exchange for this right, the
franchisee typically pays an initial fee and ongoing royalties based on
revenues or profits. - Benefits:
- For the Franchisor: Franchising can be a cost-effective way to expand a
brand’s presence without the need for the capital investment required to
open new company-owned outlets. It also allows for rapid growth and
expansion into new markets. - For the Franchisee: They get the benefit of starting a business with a
proven model, established brand recognition, and ongoing support from
the franchisor. This can reduce many of the risks associated with starting a
business from scratch. - Agreements and Fees: The relationship between the franchisor and franchisee
is governed by a franchise agreement, a legal document that spells out the rights
and responsibilities of both parties. This agreement usually includes:
• An initial franchise fee
• Ongoing royalties (usually a percentage of sales or profits)
• Terms and conditions for operating the franchise
• Training and support provided by the franchisor
• Marketing and branding guidelines - Support: A significant part of the franchising model is the support provided by the
franchisor. This can include:
• Training for the franchisee and their staff
• Marketing and advertising support
• Supply chain and inventory management
• Ongoing business consultations and advice - Examples: Some of the world’s most recognizable brands operate through
franchising. This includes companies like McDonald’s, Subway, 7-Eleven, and
many others in various industries, not just food and beverage. - Considerations: While franchising offers many benefits, it’s essential for
potential franchisees to conduct thorough research and possibly consult with
legal and business professionals before entering into a franchise agreement.
They need to be aware of the costs involved, any restrictions placed by the
franchisor, and the track record of the franchisor in supporting its franchises. - In short, franchising can be a way for businesses to grow and for individuals to own and
operate a business with the backing and support of an established brand, but it comes
with its own set of challenges and responsibilities.
