A franchising model can be considered as a triangle where the three angles represent franchisees, franchisors, and the franchising model respectively.
The startup phase of any business is rough and daunting, which requires patience and proper planning by investors and entrepreneurs. However, there are people that might fail miserably during this startup phase, due to lack of essential mentoring, capital, patience, etc.
For such people, franchising is the most suitable business model, which can help them to survive in their entrepreneurial journey without any major roadblocks.
Franchising: A Well-proven Business Model
Franchising has become quite popular during recent times in the global and Indian business ecosystems. Most international brands have taken the franchising route for expanding their businesses overseas that eventually helped their business models in attaining huge success and appreciation with the investors.
This is why a franchise-based business is now being considered as a well-proven and tested model that can help new franchisees live their entrepreneurial dream successfully.
How a Franchising Model Works
A franchising model can be considered as a triangle where the three angles represent franchisees, franchisors, and the franchising model respectively. In a franchising model, franchisees usually buy the rights to market and sell the goods and services of the franchisor, which becomes the parent company.
Franchisees use the existing business name for a fixed interval of time, generating market presence along with revenues and growth at an individual level. Franchisees normally ‘borrow’ another company’s proven business model, which makes franchising a much safer bet than a startup or independent business model.
So, if you are planning to invest in the franchising industry, have a look at these few factors before investing in a franchise.
New franchisees should do thorough market research to find out whether there is a demand for a particular service or product that one is intending to offer. Also, if you are willing to invest in a foreign franchise brand, assure yourself with the harsh fact that it is not necessary that what sells well in other countries will be equally productive here.
So, new franchisees should never jump on the franchise opportunities without conducting proper research.
Investment is among the most common challenges that franchisees face while running a franchise business. In franchising, a sizeable portion of initial capital has to be invested in the form of training, equipment, licensing rights, and others.
Franchisors usually take this amount as fees where the range differs from a couple of thousand rupees to a few lakhs, depending upon the franchising brand. In fact, there are several brands in the market now that are coming up with 0% royalty and other fees that eventually reduce burden from the franchisees.
A successful franchise brand is believed to have various franchisees operating within a territory. In fact, the market must be occupied by other rival companies as well. So, before you invest in a franchise, it is recommended that you learn and understand the details about the competition lying within the industry.
Some of the successful industries in franchising are:
-Food and Beverage
-Banking and Finance
Return on Investment (ROI)
Return on Investment is the reason why a new franchisor continues to run his/her business. Everything in this business world is all about money making that eventually welcomes profit for an organisation.
Therefore, it becomes mandatory to understand the ROI associated with different brands providing the franchise. Remember that you are here to earn money while running a business of your own choice. Thus, ROI is a must focused factor that can assure success to investors.
Your priority should be about analysing the details about the franchise and industry you are willing to invest in. Learn whether it’s a strategic business to enter into or not as it might be difficult to sustain in the industry while having many existing competitors in the market.