What is franchise concept & Why franchise concept ?
Franchising is based on a marketing concept which can be adopted by an organization as a strategy for business expansion. Where implemented, a franchisor licenses its know-how, procedures, intellectual property, use of its business model, brand, and rights to sell its branded products and services to a franchisee. In return the franchisee pays certain fees and agrees to comply with certain obligations, typically set out in a Franchise Agreement.
The word "franchise" is of Anglo-French derivation—from franc, meaning free—and is used both as a noun and as a (transitive) verb.
For the franchisor, use of a franchise system is an alternative business growth strategy, compared to expansion through corporate owned outlets or "chain stores". Adopting a franchise system business growth strategy for the sale and distribution of goods and services minimizes the franchisor's capital investment and liability risk.
Franchising is not an equal partnership, especially due to the legal advantages the franchisor has over the franchisee. But under specific circumstances like transparency, favorable legal conditions, financial means and proper market research, franchising can be a vehicle of success for both franchisor and franchisee.
We have often got entrepreneurs asking us ways to start a new business. The foremost thing that is in their minds is how to business.
Franchise concept helps entrepreneurs to understand the different aspects of how different businesses function, and which ones are ideally suited for them, or which businesses or segments they must be exploring.
While franchisee entrepreneurs generally go through a defined mechanism, where most of the how to do business questions are answered, we take a slightly different approach to franchisors or business owners who are exploring how to franchise.
Advantages to Franchisors
Firstly, franchising is a great way to expand a business without incurring additional costs on expansion. This is because all expenses of selling are borne by the franchise.
This further also helps in building a brand name, increasing goodwill and reaching more customers.
Advantages to Franchisees
A franchise can use franchising to start a business on a pre-established brand name of the franchisor. As a result, the franchise can predict his success and reduce risks of failure.
Furthermore, the franchise also does not need to spend money on training and assistance because the franchisor provides this.
Another advantage is that sometimes a franchisee may get exclusive rights to sell the franchisor’s products within an area.
Franchisees will get to know business techniques and trade secrets of brands.