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Franchising can be a smoother way to bring the dream of business ownership to life. But what exactly is “the franchise business model”? Why is it capturing so much attention right now?
At its core, franchising is a mutually beneficial relationship. On one side, the franchisor offers a proven business model, trademarked logos, professionally-developed branding, tested methods, and tools such as customized software and marketing materials. On the other side is a franchisee, someone who understands the value, benefits and appeal of the business model, and who brings a willingness to learn and follow a proven path, and hopefully, an enthusiasm or hunger for success. The ideal franchise owner wants to be in business for themselves, but does not have the experience or desire to build a new concept from scratch.
In franchising we have a saying: You are in business for yourself but not by yourself.
1. A Proven Business Model: You’re not just buying rights to a name, but a blueprint for success. Franchisors offer a path paved with training, support, and systems, significantly reducing the guesswork. They have already decided on the business concept, done the market research to determine whether there is consumer demand for their product or service, and developed the branding (a catchy, memorable name, trademarked logos, etc.) to make the company recognizable to the public. They’ve also honed their operational methods and marketing, so they know what works, and just as importantly, they know what doesn’t work.
2. Avoid Common Pitfalls: New businesses are built on trial and error, and every start-up faces hurdles. Franchisees have the advantage of relying on the franchisor’s past mistakes and lessons. Often those mistakes were costly in terms of both money and time, but all new franchisees benefit from the lessons already learned. Great franchisors never stop trying to improve their business model to keep up with current trends, and the necessary research and development is both time-consuming and expensive. Franchisees benefit by letting the franchisor take care of future plans while they concentrate on building their business for success.
3. Credibility & Brand Recognition:Step into the shoes of a franchisee, and you’re stepping into an established identity. The decision on business concept, industry, and niche specialization? Already done. Proof that the concept is accepted and needed by the consumer and the business model can be operated at a profit? Check that box too. The hard work of developing the brand and building trust? Check. Software development? Again, check. Supplier relationships? Ditto.
4. Economies of Scale: Being part of a bigger network often translates into increased buying power. Franchisees can take advantage of this to access better deals from suppliers, which translates into lower expenses and higher profits … and who doesn’t want to boost profit?
5. Training, Business Coaching and Oversight: Being a solo-preneur, especially if you’ve never been in business before, can be a lonely existence. When things go well, you’re run off your feet and can lose sight of the big picture, and when things go sideways, you can be caught off guard and not know which way to turn. One of the biggest benefits of belonging to a franchise is the training, coaching and oversight that happens. Not only are you part of a network of people who can share the benefit of their experience with you, but you have the expert who created your business model watching over your shoulder. All these people – the franchisor’s team and your fellow franchisees – they have a vested interest in your success. You have your own team of experts who are ready, eager and willing to help you build your business as big as you want to go!
The Franchisor: Oversees the system as a whole. They provide:
The Franchisee: The heart of the local organization. They:
It’s essential to note this isn’t a one-sided relationship. Success hinges on mutual understanding and growth. The franchisor thrives when the franchisee succeeds and vice versa.
Franchise Fee: This is the starting point that buys your access to the franchisor’s trademarks, rights, systems, training, and ongoing support.
Royalty Fee: This ongoing fee supports the consistent evolution and improvement of the franchise system, including brand marketing, innovations, and comprehensive support.
Franchising isn’t a decision to be made lightly. Research different opportunities, ask to speak to current franchisees, and consult with your own advisors – a franchise lawyer and an accountant. Ensure you’re equipped to navigate the world of franchising successfully.
The franchise business model is not just a strategy to expand a business, it’s a way forward for aspiring entrepreneurs. With the right franchisor, the right franchisee, and a common vision, both parties can reach their individual and shared goals by partnering in this unique business endeavour.
Thinking of joining the franchise wave?
Do your research, know yourself, get advice and if everything aligns, move forward boldly.
Remember: you’re in it for yourself, but never by yourself.
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