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If you have an idea start your own business, you should study the various options available for a successful business model. Whether you will go for Franchise or go by your own.
Franchising is an agreement that allows one the franchisee to do business under a brand developed by the franchisor.
Different Terms and Conditions of running a Franchisee business operation.
The term franchising can be used to describe a range of business structures including dealerships, co-operatives and agencies. Most common however is the business format franchise in which an entire system for conducting business is replicated.
Franchise fees (Some of the common terms followed by most of the franchisor follow).
A franchisor makes their revenue through franchise fees paid by the franchisee.
Initial fee – this fee mostly covers initial training, franchise ‘right’ and any other assistance to put just kick start the process.
Set-up costs – these covers interior decoration, stock, signage, plant and machinery and other such items
Royalties - the majority of a franchisor’s ongoing income is derived from royalties or management service fees. These are typically calculated as a percentage of the franchisee’s turnover
Some advantages of franchising
Brand recognition – You already get an well established brand name which your potential customers already know. You don’t have to start from the scratch.
Co-ordinated marketing activity - by being part of a network of franchisees, the business can be advertised more widely and more often
Training - a franchisee can often get assistance or trained personnel from the franchisor itself.
Lower set-up costs – since the franchiser already has a proven business model, you can avoid over spending on various areas.
Limitations of franchising
In some ways, a franchise is like a lease in that you buy the right to use the system for a set number of years. After that period your right to continue in the business ceases, unless there is a right of renewal.
Most of the time, reputable franchises operate under a set of specific rules, which you must fully understand and be comfortable with.