Many entrepreneurs know of the word franchise, but how many understand how a franchise works? Today we’re taking a deep dive into what makes a franchise and how it works.
Franchising is a way for individuals to take a proven and successful business concept and replicate the identical set up in different locations either across the country or worldwide.
It starts with a budding Franchisor
A company decides it wants to expand and increase market share, but it doesn’t want to manage different locations across the country, or even the globe. It is hard to manage stores if they are geographically far from the head office; instead they want someone special who CARES. Perhaps the company doesn’t have enough capital investment to open many stores in different locations and therefore looks towards franchising as a route to market growth.
Then there’s the ambitious franchisee
A franchisee may be an individual that’s looking for a career change, wants to provide more for their family or be their own boss. They’re looking for a new opportunity which inspires and challenges them. They have an amount of money, savings or inheritance to fund this venture, but they lack in industry knowledge and experience in running or setting up a new business.
This is where the union of franchising begins.
Partnering together an individual that’s passionate about a company’s business model with capital to invest. The franchisees take a proven business strategy, giving them a quicker route to a faster return on a brand which has proven success. Training, support, marketing and management advice are provided to help the individual hit the ground running. The company benefits from brand growth that may not have been possible without franchising. It is a win-win situation!
After much careful and calculated research by both parties, they agree to partner. Franchisors grant franchisees a licence to operate under their current a recognised brand. This license allows the franchisee to gain the concept, processes and systems to function an identical business in their preferred territory. This usually involves paying an initial set up / franchise fee and in most cases comes with ongoing management and marketing fees.
What are the ongoing fees for, you ask?
These contribute to support, development of the model, processes and systems, training, marketing materials, management of your business. This allows your franchisor to continually offer support, guidance, and anything else laid out in your franchise contract.
What are the rules of Franchising?
Of course, franchising does come with many rules and regulations which needs to be followed. This is very important for both the franchisor and the franchisee, ensuring protection for both parties. The agreement is a legally binding contract with stipulations to be abided over a term such as 5 years, 10 years or possibly longer.
When franchisees are awarded a franchise, they are agreeing to uphold the franchisor’s way of business practice. After all, the franchisor has proven that this way is successful with high profitability – which is why the franchisee bought into the concept in the first place.
But it’s Worth it!
Franchisees benefit from the strength in numbers – gaining from economics of scale in buying power, advertising and negotiating deals. Independent businesses must negotiate usually by themselves; having a corporate brand to help bargain better deals is a much more favourable option.
Franchise success is generated from the franchisee having a great attitude towards the brand and ability to build a strong, loyal and consistent relationship with the franchisor. Our franchisees are committed to the Award Leisure brand and enjoy all the successes that come with it!
For a handy breakdown of a franchise model, check out this video from Business Franchise Australia!
To find out more about our exciting franchise opportunity, get in touch with us to get your free brochure.