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· Out of the 105 companies that started selling franchises in 2008, more than 40 had not reported selling their first unit by the end of 2009, according to the International Franchise Association. · Franchising will always reward a business that is unique, profitable, enjoyable, and difficult for competitors to copy and offers a franchise predictable return over the long term. In this challenging economy If you have a small business that can be easily replicated, then franchising your business is a proven way to expand it at a fast pace. And if you tackle it the right way, your profitability can certainly be pumped up. But keep in mind, becoming a franchisor is not an automatic ticket to success. Franchise business model development process Nowadays, everyone is franchising their business for business development, in fact, new franchised business opens every 15 minutes of every business day. If you're considering franchising your business, you should be aware that the process of becoming a franchisor is usually long and involves considerable cost Just because you qualify to sell franchises doesn't mean you will find buyers, because it is impossible to determine if a business would make a good franchise without doing a significant amount of analysis. There are some important decisions to make for developing a franchise model such as · The franchise fee and royalty percentage · The term of your franchise agreement · The size of the territory you will award for each franchise · What geographic areas are you willing to operate · Whether the franchisee must buy product or equipment from your company · The business experience and net worth franchise need Developing a right business module And most importantly you will need to make decisions about how you will operate as a franchisor, there are various different models Usually, a company begins operations with Company Owned and Company Operated Model of business (COCO) but when the brand is well established, the company get into a franchise model such as Franchisee Owned Company Operated (FOCO) This model is best for Companies who want to reduce their capital expenditure and expand faster an in a known market. The franchise owns the business but the brand and the operations are handled by the company. On profit sharing basis where a company gets a bigger share of the profit compared to the franchisee as it is company operated. Franchisee Owned Franchisee Operated (FOFO) This model is best for companies who look for faster expansion of business/brand presence and to penetrate completely new markets with the help of local businessmen. The training of staff, initial store setup is done by the Company and handed over to the Franchise to oversee the operations and maintain standards-based on SOPs set by the Company. Company Owned Franchise Operated (COFO) This model best for Companies that want to reduce their operational expenditure. The Company leases the business operations to an interested franchise with the former holding training and SOP audits to ensure standards are adhered to. This model is adopted only in well-established markets where the company has operated and got a high return on investment Franchise Invested Company Operated (FICO) This model is similar to FOCO, but here, unlike FOCO, the difference is that the franchise is not involved in business operations at all. The company pays only an accepted fixed amount to the franchisee for the franchisee's investment in the business. Advantages of franchise model development Franchise business model development provides advantages for both the seller and the buyer. 1- For franchisors, the primary benefit is the ability to use other people’s money to expand the brand more rapidly or through or lenders. 2- The initial franchise fee or outgoing royalty they may earn would allow franchisors to develop their brand without losing power to outsiders or the burden of creditors to repay. 3- The fee and royalty can be used to fund operations, train and support franchisees, and market and advertise the brand, improve the quality of goods and services and build the brand in the marketplace. Summary Many business owners dream of seeing their company name as a brand become, with a network of franchisees from coast to coast or around the globe. If the right concept is franchised effectively, it can be a great expansion strategy that doesn't require as much up-front capital. The Franchise is the proven method to reduce operational cost, capital cost and to increase the return on investment through the brand value that the company has created for itself.
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