The advantages of franchising: How business model?

Franchising provides benefits for both seller and buyer (by the way, on the website you can see popular franchise in 2018).

For franchisors, the main advantage is the ability to use other people's money to expand the brand more rapidly than they could either on their own or through investors or lenders. The initial franchise fee and ongoing royalties they collect allow franchisors to build their brand without sacrificing control over outsiders or the pressure of repaying lenders. Fees and royalties are used to Fund the operations in the headquarters of the Corporation, training and support to franchisee, marketing and advertising of the brand, improving the quality of goods or services and the creation of the brand in the market.

franchisee benefits include:

• higher chance of success than individual entrepreneurs;
• the reduction in open time;
• initial training and ongoing support;
• assistance in finding an optimal site;
• the selling power of a known brand;
• reduced costs through group purchases;
• established business models;
• national and regional advertising campaigns;
• the formation of leadership customers through websites and centralized call centers;
• a network of peers (other franchisees) to provide advice and moral support through the corporate intranet, annual conferences, and franchisee associations;
• assistance in securing financing.

As with any business opportunities, there is no guarantee of success, and there are tradeoffs. In a sense, franchising is similar to the payment of the condominiums instead of own a house. In a condominium the monthly fees are combined for common external maintenance (mowing, demolition, roof repairs, etc.) - a compromise that many are willing to do to afford to focus on your core business of life his life (or business) within the walls of their condo (or franchise). And unlike tenants who can be evicted (or corporate employees who can be dismissed or reduced ), the franchisee will have their own power: the franchisor cannot fire the franchisee, which operates in accordance with the agreement on the franchise.

Follow the system is a mantra in franchising and critical to the success of the franchisees. So, as a franchisee buying into the operating system of the franchisor, believing that if they follow the letter they will succeed and become profitable. Smart franchisors are always open to suggestions from their franchisees for a change (and to local or regional variants), but any franchisee leaves the system without the approval of the franchisor runs the risk of violating the terms of the franchise agreement, which may result in the termination of the right of franchisee to conduct business under the name of the franchisor. Franchisees also must agree to keep confidential a secret system of the franchisor and the trade secrets, as well as to sign a noncompetitive agreement.

Not everything created for the franchise. Some want complete independence for the success or failure of their own, while others prefer a compromise was found when working in a larger organization. For the success of franchising partnerships, the buyer must be comfortable not only with the franchise model, but also with the culture, values, and goals of the franchisor - and Vice versa.

In this light, many see franchising as a commitment, like marriage. There is good agreement between franchisor and franchisee, sharing common goals in the long term, is essential for the success of each franchise unit, and thus the brand as a whole is an important factor that should be seriously considered by both parties before signing any contract.

Translated by "Yandex.Translate": translate.yandex.ru.