'Franchising' as a business model: benefits and pitfalls!

I used to work for an ‘Education’ franchising company during my initial four years of employment, after completing my Masters degree in business management.

The main reason or concept behind ‘franchising’ is to recruit business partner/ ‘new’ entrepreneur/ people (staff) to refer your brand to other customers at large in different locations. If you want to improve on your marketing efforts and brand appeal, you can leverage the concept of ‘franchising’ really well. In such a business model, you enter into an agreement with a franchisee (the ‘joining’ person who will do the marketing for you). As per this agreement, you need to supply the franchisee with marketing and promotional materials as well as provide all the ‘necessary’ training needed to enhance the brand appeal. In addition, with every successful sale that happens, the franchisee and your company earn ‘profit share’ as mutually agreed.

Franchising, as a concept, has taken off well in India, particularly, in the education industry, restaurant business, MNC retail outlets, departmental stores ( though there are no ‘major players’ in India as in US, Middle east). Mind you, there are pitfalls, if the ‘franchisee’ is expecting ‘hand holding’ and easy money to flow in, without having to do much work. Although franchising involves dealing with an established brand and one gets access to training and promotional materials, the franchisee still have to do the ‘selling part’ of the work. He will need to convince customers to buy the products or services. Hence, selling skills are ‘essential’ to succeed in this business. At the same time, it is essential for the franchisor to be ‘responsive’ to the franchisee’s needs. Major benefits to the franchisee in this business model:

Negligible startup costs:
In a ‘franchising’ business model, franchisee need not spend as much as one would when starting a new business of his own.

Training provided:
The other significant advantage is that the franchisee gets all the training needed to get started. Everything pertaining to product knowledge and know-how is imparted to him by the franchisor. Thus, he need not spend time in preparing product knowledge.

Promotional material provided:
The franchisor will provide him all the promotional and publicity materials needed to succeed. Unlike a conventional business, where he needs to prepare all promotional materials from scratch, in franchising this is not the case.

Established brand:
The most ‘significant advantage is that the franchisee is doing business with an already established brand. If he were to start his own business, it would take him quite a bit of time to ‘break even’ and start being noticed by your target customers.

Other points for conducting ‘successful’ franchised business:
– Please ask ‘all’ questions – when you have doubts about the ‘franchisor’ company and products or services. If you are not clear about it, you will not be able to sell or do well!
– It is normal – to bear initial expenses by the franchisee in setting up the necessary infrastructure ( Office furniture, premises’ rent and other ‘usual’ housekeeping work) to sell and promote the products.
– Please utilize – the promotional materials provided. These have been prepared by marketing experts and will help you bring more sales
– Please don’t sign a contract without understanding – ‘Hiring’ a lawyer is a good idea because you are entering into a legal partnership.
– You can expect – some wastage/ aberration in business plan achievement – Initially,you may not be able to sell all the products or services within the timeframe specified. But, the performance in sales improves as you go ahead with consistent efforts.
– It is better not to opt – for franchising – if you are not passionate about starting and running your own business!

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