Franchise, we have all heard all heard the term, we know restaurants do it but do we know what does it actually mean and how does it work?

1. See How a Franchise is More
than Just a Restaurant
Branch
Franchises, we have all heard the term, we know restaurants do it
but do we know what does it actually mean and how does it work?
What is a franchise ?
Franchises have existed in the world for a long time in some form
or other, but the kind of franchises that we know of started around
the turn of the nineteenth century. A franchise is an authorization
offered to a party by the parent company, wherein the party
represents the parent company and carries out its commercial
activities on behalf of the company while sharing profits for the
same. In other words, a franchise is an agreement made between
the parent company and the franchise partner, where the franchise
partner pays a sum of royalty to the company in exchange for
using their brand name and for duplicating their businessmodel
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2. to run a successful business unit for the company. The profit is
shared by the parent company and the franchise partner.
Why do companies franchise ?
A franchise is like a joint partnership between the franchisor and
the franchise agent. The franchisor or the parent company wants
to expand and create a foothold in a region or area and might be
wanting to do it in more than one region in quick succession.
Something like opening multiple retail units would require an
insane amount of investment and resources. By giving out
franchises for these units, the company manages to reach its goals
without the investment by partnering with franchise agents, who
will serve as their representatives and will invest and take care of
the units on a profit-sharing basis.
Why do individuals buy franchises ?
For any entrepreneur, buying a franchise is a safe investment and
helps them attain their goals of running their business with the
safety net of an established brand and also with the support of an
established company. A franchise helps the individuals acting as
agents by making it easier to break the barriers to entry. As it is an
already known brand, loyal customers start providing revenue to
the franchise from the start and that is one major advantage of a
franchise and one of the reasons why an individual would choose a
franchise.
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3. How does a franchise work ?
As mentioned earlier, a franchise works as a unique partnership
agreement between the two parties.
But why and how does it work? The parent company has created a
successful business and has created a successful brand in whatever
may be its line of product or service. But the growth of any
company will only be limited if it does not grow geographically and
capture different markets from more regions. While some
companies may have the financial capability and the resources
needed to expand their business on other lands and create
multiple units, most companies lack this ability. Such situations
are not new, from the time of the kings, leaders who wanted to
grow their empires have had the need to reach other regions and
in order to do this, they started giving out franchises as units to
look after for the company.
The franchise partners act as agents or representatives for the
company working on behalf of the company as it does use the
company’s name. For this, they are taken as part owners, who own
the unit but pay a royalty sum to the partner company for using
the brand name and share their profits with the company. The
company along with their brand name also provides full support to
the franchise partner in planning, starting, procuring, training and
actual execution and operations of the business. This is a great
boost for any business owner, to get the help of an experienced
business in setting up their own. Let’s look at some salient features
of a franchise.
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1.It is a profit-sharing partnership between the two
parties.
2. The parent company’s contribution includes:

5. A.The company’s brand name to be used by the agent, who will
benefit from the brand’s familiarity and customer base.
B.Assistance in all matters of starting the business, wherever the
agent needs help for example, in choosing a research-backed
location for the unit or in procuring equipment or supplies.
C.Providing complete training in all operation exercises like
manufacturing processes or sales processes.
D.A meticulously created business model detailing all processes
and reducing room for error or failure.
E.Quality standards, which are demonstrated to the franchise and
the franchise gets trained in and is expected to follow.
F.Marketing assistance along with running nationwide marketing
and advertising campaigns, which the company does for the
brand.
3. The franchise partner’s contribution includes:
A.Investing in the unit as an owner.
B.Day to day operations held at the unit, for example, procuring,
training of staff, manufacturing, sales, maintenance of the unit,
etc.
C. Hiring and management of the staff at the unit.
D.Regional marketing and advertising campaigns to increase
sales.
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6. E. The expenses, which are borne by the unit.
Franchises in India
Today, India is the second largest franchise market in the world
with close to two lacs franchises in the country. India has a high
number of urban and small-town inhabitants, who provide the
customer base, which allows the franchise market to grow. India
really came into the franchising model of business in the 1990s
during the era of liberalization and privatization. Since then there
has been no looking back and the franchise market has been
booming. The last decade has seen a drastic increase in the rate of
growth of the franchise business with an annual growth rate of
30%. The Indian franchise business is currently worth over 50
billion US Dollars and is expected to 150 billion USD in the next
five years.
So now you know why the franchise market in India is booming
and why everyone is taking a franchise. It is a win-win-win
situation for all, that is for the parent company, the franchise
agent and the final customers because they are the ones who enjoy
the fruits of the franchise in the form of its different products and
services and pay for them. Their demand is what has lead to the
growth of the franchise industry in India and is the reason why
franchises have become so common.
This would have shown you a little more about the
glorious franchising business and now you will know a
franchise as more than just a restaurant branch.
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