Franchise Business – Meaning, Types of Models, Benefits

Running a business involvesestablishing a strategic plan and a successful business venture. While starting an independent business might be an option, collaborating with an established company to benefit the business system can be more effective.

If one is looking forward to collaborating with other companies, it can help one understand what a franchise is and its benefits.

What is Franchise Business?

When a group or an individual from an establishedbrand owns a business, it becomes a franchise. This business works under a brand name and implements all the business strategies.

Franchises are prominent business arrangements across different industries in several stores with other locations and franchises. Under the franchise business, the franchiser develops the brand and grants the visitors the license to start a new site in the brand’s name and use the intellectual property.

Franchisee also plays a crucial role in the franchise business as they purchase the right to use the name and company of the franchiser to run the business. The firm pays a percentage of the income to the franchiser. The revenue is known as a royalty.

The Best Franchise Business is the one having good brand value & decent investment volume.

Types of Franchise Business Models

Here are various types of franchise business models –

FoCo Model

FoCoModel means franchise-owned company. Under this model, the franchisee owns the property and does all the capital expenditure. The franchising company manages the outlet operation.

The model is prominently known as franchise investment company operated. It is one of the most prominent models with international food chains.

The franchiser controls the quality of the product or services by having all the employees. The control over the quality assures that the customers get what they are looking for.

Fairway Supermart is one of the Best Supermarket Franchise providing FoCo Models to its clients.

Advantages of the FoCo model

  • The franchisee can focus on other core activities as they are not involved in the day-to-day operations.
  • Customer experience is in the hands of the company, so customer handling is better.

Disadvantages of the FoCo model

  • Franchisee gets all the profit share which is just over the rent of the property and the capital cost.It is not a lucrative option
  • it is not ideal for people looking forward to renting property to start a franchise.

FoFo model

The FoFo model is also known as franchise-owned, franchisee-operated. It means that the franchisee provides all the capital and operational resources. They manage the entire show in the guidelines of the franchisor.

Under this model, the franchiser has minimum expenses, as the franchisee bears all costs.The franchisee makes most of the investment andgenerates significant income. Thefranchisor can expect only minimum royalty.

Advantages of the FoFo model

  • great opportunities for franchisees.
  • a successful franchisee can on optimum returns on investment

Disadvantages of the FoFo model

  • This model has a high failure rate compared to other business models.
  • The variance of reality vs. expectation can overwhelm a franchisee.

CoCo model

The CoCo model is known as the company-owned company operated. The company owns and operates the business at a specific location, for it is the franchising company thatbares all the capital and operational expense.

The model is perfect for franchisers who need help finding an ideal franchisee for a specific destination where it sees good potential. Franchisors mainly have a deep pocket, so they do not feel the need to share any profit with the franchisee.

The advantage ofthe CoCo model

  • is that it helps the company to showcase the outlet and the product range to all the clients.
  • The entire profit goes to the company as there is no channel partner.

Disadvantages of Coco Model

  • The outlet can have efficiency and productivity issues as the employee manages the business model instead of the entrepreneur.
  • The company diverts the energy and resources on all the activities, which is not the core business of running or managing the store outlet.

Benefits of Franchise Business

Some of the fantastic benefits of franchise business are As follows

Business help

One of the significant benefits of franchising that one can receive from the franchiser is business assistance. Depending on the terms and conditions of the franchise agreement, the franchise can get a turnkey-basedoperation. They might be provided with all the equipment the brand uses for advertising plans and the strategies they need to run the business.It is important to haveBusiness knowledge to run a successful business.

Brand recognition

The best part about running a franchise business is that a franchisee can get brand recognition. If one starts a business from scratch, onemust build their brand, which would take time. While franchises already have a brand name, people will automatically know what business they are in when a person is running a franchise.

Great buying power

The vast network size of a franchise business makes it easy for a franchisee to run a business. If one operates a standalone company, onepays more per item because the order is small. Still, the network of franchises is vast that has the opportunity to purchase goods at a huge discount price. The parent company can use the network size to negotiate great deals, which every franchise benefits from.

Like other business decisions running a franchise also has some terms and conditions. Before starting a franchise business, one must check out the types of franchises available.

Usman Zaka
Author: Usman Zaka

I have been in the marketing industry for 5 years and have a good amount of experience working with companies to help them grow their social media presence. My expertise is content creation and management, as well as social media strategy. I'm also an expert at SEO, PPC, and email marketing.

About Usman Zaka

I have been in the marketing industry for 5 years and have a good amount of experience working with companies to help them grow their social media presence. My expertise is content creation and management, as well as social media strategy. I'm also an expert at SEO, PPC, and email marketing.

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