A franchise is a business that is run on a specific model. Franchises are also called ‘chains’. For example, pizza outlets such as Domino’s and Macdonald’s are franchises. Such stores operate in many cities and at multiple locations in a single city. The person who offers the franchise is known as a franchiser and the person who invests in it is a franchisee. Franchisers own the trademark, label or brand. They license the franchisee to use the trademark or brand in exchange for a price – a lump sum paid upfront and a monthly royalty payment.
In return, the franchisers offer certain facilities. They help the franchisee to set up the business and provide him with support services. Though the franchisee operates the business on a daily basis, he does not own the brand or trademark.
So what are the benefits of franchises? The main advantage is that the brand is already well-known and a proven success. The franchiser also takes care of the training and other aspects, like the business model on which it is to be run, the site selection etc.
What are the disadvantages?
Franchises are costly to start as they require a large investment. The set-up, right from the look of the place to the staff uniforms, has to conform to the franchiser’s brand image. All the earnings don’t go to the franchisee and he also has no control over how the business is run as any change has to be approved by the franchiser.
Picture Credit : Google
