A business franchise can be elucidated as one where the owner or franchiser markets the rights to the business model and logo to the third party who is the franchisee. A Franchiser provides licence to a third party (Franchisee) the right to operate a business or distribute goods/services using the franchiser’s business name and system for an agreed period of time , in return of fee.
Franchises are now fairly a common gateway of entering into the world of business and are in so much practice that there are several franchises operating within a limited area. There is a lot of scope of franchise business in India.
Franchise Business- How Does it Work?
In a franchise business, all the involved parties are required to protect several interests. A Franchiser is supposed to obtain the trademark protection, keep the business knowledge safe and control the entire business concept. The Franchisee is supposed to execute the duties and secure the name and fame of the business which has been earned by the franchiser. The relationship between a Franchiser and a Franchisee is governed by a contract called the ‘Franchise Agreement’. The agreement outlines privileges, terms & conditions, restrictions and other details. The business operated under a Franchise Agreement is often termed as a ‘Franchise Outlet’ or a ‘Franchise Location’. Franchise is also a way of building a chain of stores and increasing the growth and popularity of a business.
Pre-Requisites of a Franchise
- Location: Franchisees should make sure that they are not operating in an area where other similar entitles are already operating. They should attempt to operate as independent entitles. Location acts as a key factor in building up a franchise.
- Access to Capital: Though franchise business is much less capital intensive than building up a self-business, it requires adequate capital to launch and manage the franchise program.
- A Compelling ROI: Termed as Return on Investment is the key factor. Without a proven and strong economic model, there is no point of heading forward. Business owners will be looking for minimum 15 percent ROI.
- Commitment to Long-term Relationship: Franchising is all about relationships. Most franchise are 10 years long and you should be committed to long term relationships, both good and bad.
Scope of Business Franchise
The thought of ‘Be your own boss’ can be seen in today’s youth as they believe being entrepreneurs in the truest sense. Well, setting up an entirely new business takes time, needs to invest a lot of capital and requires new ideas to expand it. Franchise is a better option as one can run a business without investing much capital and brain into it. In franchise, one can sell the brand without promoting it as it already has brand value and does not require to be known by people. One can invest a sum of money and start their stores as a Franchise of the original company and get commissions or percentages on the total sales.
All you need to do is plan, choose your location, select your franchiser and start up your business. Maintain the rules of your company and see yourself flourish in the long run.