A good business model offers the advantages that do not only help a company sustain itself but also promote ways to generate enough revenue to succeed even in the most competitive environment. Franchising business model is one of the most popular methods that have helped many companies conquer the global market. The likes of McDonalds, 7-Eleven, and Starbucks are just some of the planet’s most popular franchises. They have grown so big that became public companies and staples to many offshore investments.
Basically, a franchise is an official agreement between two parties: the franchisor (owner of an established brand with an already proven business format) and the franchisee (pays the rights and license to use the brand and its related operations), where both enjoy the benefit of this proven and tested business model.
There are several reasons why entrepreneurs and business owners prefer this particular business model. Here are some of them:
- Business growth and brand expansion
Entrepreneurs who have already succeeded in establishing a brand and an effective business format can further grow their ventures through franchising—and the good thing about this option is they don’t have to spend their own money in order to do so. This is probably the most cost-effective way to build “branches.”
- Reduce risks and possible failure
Since the franchisee is the one who provides the initial capital, franchisors don’t have to be afraid of possible failures in the first stages of the business since it’s now the former’s job to make sure that they generate reasonable revenue? The franchisee’s success is also the franchisor’s, and the other way around.
- Offers beginner-friendly business ventures
Franchisees don’t have to obtain a business degree nor an extensive business experience to run a franchise. All they have to do is to consult the franchisor’s fail-proof and already-tested business model as their guide. Depending on the type of business, trainings can last from a few weeks to a few months.
- Provides several business options for franchisees
The franchising business model is applicable to almost every type of business venture. With this, you can choose from a variety of options of products and services depending on preferred business interest. Brands can range from small booth-type food stalls to internationally known hotel chains.