What do we understand by franchise and how does the franchise model work?

What do we understand by franchise and how does the franchise model work?



A franchise is referred to as a business started out of a set business with an established brand, as an expansion of the franchisor’s proprietary business. This type of business strategy is generally adopted by the company to capture and increase its market share.  The franchise model is used to reach out to more and more consumers to sell goods and services. It is known to be an effective marketing strategy to create brand awareness by giving the business unit to be run by an authorized vendor. Through a regulated manner, the business is expanded, and products and services are distributed to cater to the growing demand in the market. 

How does the franchise model work? 

* The franchise business model can be seen as a joint venture between the business proprietary owner – franchisor and the person running the franchise – the franchisee. 

* The original business owner sells the right to the franchisee to use its brand name and idea and further sell its products and services under its established name. They both sign a mutually beneficial agreement.

* Generally, the agreement is standard for all the franchisees obtaining the franchise from the franchisor. The rules and all the guidelines to follow for the franchisee are standard and they are expected to run the franchise in the same manner, to keep the brand image undamaged. 

* While giving away the rights to run the franchise to various entities, the businesses make sure that the franchisee is maintaining its integral aspects such as branding, vision and mission, objectives, product quality etc 

* Usually the businesses, while giving the franchise, train the franchisee on how to effectively run them. They also monitor the units and review if the franchisee is keeping up with the standards. 

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