Franchising is a marketing strategy to expand business. It is a partnership between a Company (Franchisor) with an entity who is an Individual or another Company (Franchisee) to sell its products or services under the Trademark of the Franchisor. The franchisor maintains a number of controlling factors related to the franchise. For example – Predetermined Pricing, Same Name, Operating Procedures, etc.
Franchisee is the entity which purchases the Franchise. The Franchise is responsible for decisions related to that location of business but many other decisions say, the name of the product, price of the product, etc are predetermined by the Franchisor.
Terms of Payment:
The Franchisee is supposed to pay the Franchisor as per terms mentioned in the Franchise Agreement, usually either a flat fee or a percentage of the revenues generated from the sales at that location. This flat fee is also called as Royalty.
Benefits to the Franchisor:
When a company is looking for expansion, it can think of looking out for Franchising. It will open up another branch for the Company. This becomes very much beneficial for Start ups looking for expansion.
McDonald’s when started off as a small restaurant selling Hamburger in San Bernardino, California, US – is now providing its products through out the World with its choice of Franchise consisting of 37885 outlets (2018)
McDonald’s is serving 69 million customers daily in over 100 countries with its Franchising Business Model.
Franchisor provides employment to many. McDonald’s is the World’s fourth largest Private Employer with 1.7 million employees as per two reports published in 2018. The growth since 1940 till 2019, has been tremendous, thus proving the success of franchising model of business expansion.
Albeit, the other factors required for building a successful business empire is the basic ingredient in the Progress. Look out for our next Blog for further information on Franchising Business.