A Franchise Business is one of the most successful business ever across the globe. A Franchise business model is a model in which the franchisers (owners) sell their business model and logo (brand name) to third parties, called Franchisees. It would be very hard to cross three streets in a city and not finding any franchisees now a days.
McDonalds, Subway, H&R Block & UPS are well known business models in united states. BATA, NIIT, Aptech are famous in India.
Investing and Working of Franchise Business : To invest in a franchise business, the franchisee must first pay an initial fee for the business rights, training and any other required equipment. Thereafter, the franchisee will pay the franchise owner a royalty income either monthly or quarterly basis. This payment is usually calculated as percentage of the total gross sales.
After signing the contract, the franchisee opens a replica of the franchiser’s business and follows the same selling techniques. The main advantage of franchisees is you will get the brand name advantage.
Control of the Franchise : Generally, the franchiser wants the business model (products manufacturing process, selling methods and financial transactions) same. It is to be remembered that the franchiser not only is buying the rights to sell the products but also the responsibility to follow the processes.
For example, you can observe that all the Mcdonalds outlets has employees wearing the same uniform, wishing in the same manner and the burgers also tastes almost the same.
Franchisee model can be defined in one simple line as : Rather than selling the products, you can sell your business.