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General Franchise Concepts

General Franchise Concepts

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Published by: eaharri on Jun 21, 2013
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Introduction
Taking on a franchise is an option worth considering for anyone who wants to
run a business
 but doesn't have a specific business idea or prefers the security provided by an establishedconcept.The right franchise can give you a head start. Instead of setting up a business from scratch, you
use a proven business idea
. Typically, you trade under the brand name of the business offeringyou the franchise, and they give you help and support.Successful franchises have a much lower failure rate than completely new businesses. However,you will still need to work hard to make the franchise a success and you may have to sacrificesome of your own business ideas to fit in with the franchisor's terms.This guide will help you decide whether franchising is for you. It shows how you can find theright franchise, and highlights the key issues you need to consider.
What is franchising?
The term 'franchising' can describe some very different business arrangements. It is important tounderstand exactly what you're being offered.
Business format franchise
This is the most common form of franchising. A true business format franchise occurs when theowner of a business (the franchisor) grants a licence to another person or business (thefranchisee) to use their business idea - often in a specific geographical area.The franchisee sells the franchisor's product or services, trades under the franchisor's trade mark or trade name and benefits from the franchisor's help and support.In return, the franchisee usually pays an initial fee to the franchisor and then a percentage of thesales revenue.The franchisee owns the outlet they run. But the franchisor keeps control over how products aremarketed and sold and how their business idea is used.Well-known businesses that offer franchises of this kind include Prontaprint, Dyno-Rod andMcDonald's.
Other types of arrangement
Different types of sales relationships are also sometimes referred to as franchises. For example:
 
Distributorship and dealership
- you sell the product but don't usually trade under thefranchise name. You have more freedom over how you run the business.
Agency
- you sell goods or services on behalf of the supplier.
Licensee
- you have a licence giving you the right to make and sell the licensor's product.There are usually no extra restrictions on how you run your business.
Multi-level marketing
Some businesses offer franchises that are really multi-level marketing. Self-employeddistributors sell goods on a manufacturer's behalf. You get commission on any sales you make,and also on sales made by other distributors you recruit.
meaning
Aformof  business organizationin which afirm which already has a successful  product or  service(thefranchisor )entersinto acontinuing contractual relationship with other businesses (franchisees)operating under the franchisor'strade nameand usually with the franchisor's guidance,inexchangefor afee.
 
The Benefits of Franchising in India
Franchising has been around in one form or another since man first began toengage in commercial enterprise. It has evolved from a simple grant of a right or privilege in themiddle ages to the sophisticated business format franchise concept of today. This unique patternof business can be defined as follows:
"A franchise is a business arrangement where the developer/owner (the franchiser) of a businessconcept grants others (the franchisees) the licensed right to own and operate a businesses based on the franchiser's business concept, using its trademark." 
Franchising is a marketing system for creating an image in the minds of customers about thecompany's products or services. Franchising creates a distribution network of interdependent business relationships that allows a number of people to share brand identification, a successfulmethod of doing business and a strong marketing and distribution system.The primary benefit of franchising is risk minimization. The other benefits are:• Franchise investment can be thoroughly researched before any significant expenditure is made;• Franchising provides a uniform system of operation, so that consumers receive uniform qualityefficiently and cost-effectively;• Franchisers sell a defined, proven business format or method of operation, offering a product or service that has sold successfully (an independent business is based on both an untried idea andoperation);• The franchiser also provides management assistance, including accounting procedures, personnel and facility management;• The franchiser provides marketing support, one of the biggest benefits; and• Franchising has found a solid economic niche that caters to specialized needs.
Benefits to franchiser
There are many benefits to the franchiser, as this type of business:• solves the greatest obstacles to growth, that of obtaining capital and committed managementtalent to run new locations;• creates additional income streams from franchise fees and royalties;• rapidly builds a much larger identity that draws more customers to all locations;• gives higher profit margins because of the larger quantities of merchandise purchased throughthe franchise system; and• creates the ability to compete in the marketplace against large chains.
Benefits to franchisee
The system also has many benefits for the franchisee, as they:• are able to open a business, but avoid costly start-up mistakes by drawing upon the experienceof the franchiser;

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