14 Jul ASK A FRANCHISE FUTURIST: WHY IS FRANCHISING A GOOD BUSINESS MODEL FOR FRANCHISEES AND FRANCHISORS?
As franchise futurist keynote speakers and franchising consultants, we often offer live and virtual speaking events and programs. But audiences (especially first-time attendees or those thinking of entering the space) often can benefit from some background information on the industry before attending. To wit, as franchise futurist keynote speakers and consultants, we’d explain that franchising is a business model where a franchisee purchases the rights to use an existing business’s trademarks, products, services, and entire business system. The franchising company that allows this use of their brand and model is known as the franchisor. A few things to know about the field follow:
- Franchisors grant franchisees the license to operate under their brand name and use their operating system, in exchange for an initial upfront franchise fee and ongoing royalty payments.
- Per franchise futurist keynote speakers and franchising consultants, franchisees can benefit from an established brand, proven business system, and ongoing support from the franchisor, while retaining control over the day-to-day operations of their local unit.
- For franchisors, the practice allows rapid expansion and distribution of products/services without major capital investment. It also creates an income stream from franchise royalties.
- You may observe that franchising is common in sectors like restaurants, hotels, retail, services, real estate, and automotive repair. Popular franchises include the likes of Arby’s, Pizza Hut, 21st Century Real Estate, Berkshire Hathaway, Taco Bell, McDonald’s, Wendy’s, Subway, Burger King, 7-Eleven, etc.
- Franchise agreements impose standards and requirements to maintain brand integrity across all units. Franchisees must undergo training and meet financial requirements.
- For prospective franchisees, buying into a franchise can be less risky than starting an independent new business, but they must also pay fees and follow brand rules. What’s more, general levels of profit depend on how well their individual units clock in.
- The franchising model provides incentives for both franchisors and franchisees to put effort into the success of the brand and the business.
Long story short: According to franchise futurist keynote speakers and franchising consultants, the model leverages brand power while allowing decentralized ownership and control over each local unit or outlet. And it can help a local business chain quickly go national, international or even worldwide.