This article will tackle the definition of franchising.
Franchising is a practice where a corporation allows an other entity to use the company's already successful business model. The franchisor (the company that provides the business solution) and the franchisee (the entity that uses it) enter into a contract to use and capitalize on the company's successful business model and/or it's existing brand awareness (most often called Goodwill) for a faster return of capital.
In return, franchisees pay two payments in general. First is a one time payment, called the franchise fee, and the other is royalty fee, which is a recurring expense, for the continuous usage of the business model, advertising and training costs. Royalty is usually 3-10% of gross income.
That's pretty much what franchising is.
One common misconception about franchising is the statement, "I am buying a franchise.". You are not buying, you are capitalizing onto the business model. What you will own are the physical assests that are needed to act upon the franchise, like the building and equipment.
For a business to work as a franchisor, it must have a good track record of profitability and the business system it employs is easily duplicable. Otherwise, that business is not suitable for franchising.
What's so great about franchising?
For the franchisor, the business can grow and gain more branches while lessening the traditional risk and liability of doing so. It is also a great way to gain more brand recognition and reputation.
For the franchisee, they are investing in an already proven business model and recognized brand. In fact, a franchising business is 90% proven to be successful. With a success rate like that, who can go wrong?
Finding for franchise opportunities Singapore business, visit http://www.dougleschan.comFranchising is a practice where a corporation allows an other entity to use the company's already successful business model. The franchisor (the company that provides the business solution) and the franchisee (the entity that uses it) enter into a contract to use and capitalize on the company's successful business model and/or it's existing brand awareness (most often called Goodwill) for a faster return of capital.
In return, franchisees pay two payments in general. First is a one time payment, called the franchise fee, and the other is royalty fee, which is a recurring expense, for the continuous usage of the business model, advertising and training costs. Royalty is usually 3-10% of gross income.
That's pretty much what franchising is.
One common misconception about franchising is the statement, "I am buying a franchise.". You are not buying, you are capitalizing onto the business model. What you will own are the physical assests that are needed to act upon the franchise, like the building and equipment.
For a business to work as a franchisor, it must have a good track record of profitability and the business system it employs is easily duplicable. Otherwise, that business is not suitable for franchising.
What's so great about franchising?
For the franchisor, the business can grow and gain more branches while lessening the traditional risk and liability of doing so. It is also a great way to gain more brand recognition and reputation.
For the franchisee, they are investing in an already proven business model and recognized brand. In fact, a franchising business is 90% proven to be successful. With a success rate like that, who can go wrong?
No comments:
Post a Comment