Understanding Franchise Business Model and Benefits

franchise business model

A franchise is an authorization granted by a business or the government to an individual or a group to engage in certain commercial activities or act as an agent for another business. Nowadays, there are several franchise business models for an interested entrepreneur. It is important to understand the type and investment each franchise business model incurs for the best ownership decision.

Types of Franchise Business Model

Product Franchise

This franchise refers to the customer-supplier relationship between a dealer and a supplier in which the dealer acts as a supplier. The franchisor trains the individual who purchases a franchise in product specifications, promotional techniques, service techniques, and brand-exclusive image knowledge.

Joint Venture

A joint venture agreement is signed between the franchisor and prospective franchisees after the franchisor, and prospective franchisees have discussed the terms and conditions in a way that benefits everyone.

Business Format Franchise

The Business Format Franchise creates a win-win situation for both the franchisor and the franchisee because the franchisor’s income is linked to the franchisee’s income. It provides a strong incentive for the franchisee and assists him in becoming more assertive and competent.

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Conversion Franchise Business Model

This franchise is created by converting an existing business network operator. Here, the operator’s business is transformed into a franchise and then operates under the network’s brand.

Master Franchise Business Model

A master franchisee contacts a foreign franchisor about becoming a local franchisor in the target country. The master franchisee is responsible for market research, which includes determining the local market’s demand for the product, franchisee recruitment and training, and quality control and franchisee support.

Regional Master Franchise

A regional master franchise acquires the franchisor’s rights and establishes a franchise through a combination of company-owned locations and sub franchises. The franchisee establishes additional sub franchises and expands the business in this case.

Top Franchise Benefits

  • Franchises enable an individual to combine the advantages of small business ownership with those of a large business.
  • Prior experience in the field is not required to obtain a franchise, as the franchisor will provide training.
  • Franchises have a higher success rate than new businesses.
  • It’s easier to find a franchise and less expensive than starting a new business.
  • A franchise is evident in the benefits of a positive image, effective management, a faultless support system, access to successful advertising, and adequate market coverage.
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Individuals seeking to establish a presence in the business world generally seek franchises, while companies seeking to expand into new markets seek to distribute franchises so that a large number of customers can benefit from a product or service. Cheap franchises consistently outperform their larger counterparts in terms of affordability. Numerous industries offer inexpensive franchise opportunities, including accounting, advertising, automotive, cleaning, cooperative, fitness, food, health, coffee, consulting, banking, entertainment, and cosmetics and beauty products.

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