Marketing Agency in Mumbai
Franchising is a form of business that involves two parties, namely, a franchisor and a franchisee. It is classified as a business relation in which the intellectual property, proprietary business knowledge, business model, brand name, and the rights to sell its branded products and services are granted to a franchisee.
In return, the franchisee pays a certain amount of money known as the franchise fees and agrees to comply with certain obligations, typically set out in a franchise agreement.
It is based on a marketing concept that can be adopted by an organization as a strategy for business expansion. Not only does franchising provide exposure to a brand but it also helps it to improve its relations and gain goodwill. These market relations, goodwill, and a large expanse of the customer base help the franchisor to entice potential franchisees to invest in buying the franchise of their brand
Buying the franchise of a well-established brand proves to be quite propitious for new entrepreneurs because they receive a tried and tested business model. This reduces the risk factor to a large extent. They are also provided with market goodwill, the creation of which is one of the most challenging tasks faced by any emerging business. A franchise business has better growth prospects than any other startup.
UNDERSTAND FRANCHISING
A business chooses to franchise its business largely in two contingencies: When a business wants to increase its share in the market and the sector it is a part of or to increase its geographical reach. It may franchise its product and brand name to do so at a comparatively low cost. A franchise is a business entity yielded from the joint venture between a franchisor and a franchisee.
The franchisor is the one who owns the business. It sells the right to use its name, idea, and products or services produced by it. The franchisee buys this right to sell the franchisor's goods or services under an existing business model and use its intellectual property for earning profits.
Franchises are a popular way for entrepreneurs to start a business, especially when entering a highly competitive industry such as fast food. One big advantage that comes along with purchasing a franchise is, that you have access to an established company's brand name and consumer base. You won't need to spend in acquiring resources that would assist you in getting your name and product out to customers.
BASIC FRANCHISE RULES AND REGULATIONS
Franchise contracts can be easy at some points but it can be quite complex to formulate policies and vary for various franchisors and franchisees. A franchise agreement contract includes several points, some of which are as follows:
The franchisee must purchase the controlled rights, trademark, from the franchisor in exchange for an upfront fee.
The franchisor often receives payment for providing training, equipment, or business advisory services.
The franchisor receives either ongoing royalties or a percentage of the operation's sales.
A franchise contract is temporary, similar to a lease or rental of a business. It does not mean that the business is owned by the franchisee. Depending on the contract, franchise agreements may last between five and 30 years.
DIFFERENCE BETWEEN A FRANCHISE AND A STARTUP
People often tend to confuse a franchise with a startup. The two are quite distinct. A startup refers to a business that is started and owned by you. You can resort to a startup if you don't wish to work on someone else's business model. But starting your own company is risky, though it offers rewards both in monetary and personal terms.
When you plan to start your own business, you're on your own. Many questions that hover in your mind remain unanswered. Will my product sell? Will customers like what I have to offer? Will I make enough money to survive?
The failure rate for a new business is higher than that of a franchise. Roughly 20% of startups don't survive the first year of their establishment. About 50% last until year five, while only a small percentage of 30% continue to stay in business after 10 years.
Only if your business is going to be able to beat the odds, you will be able to reach the zenith of success. To turn your dream into reality, expect to work for long and hard hours without any sort of support or expert training.
If this sounds like too big a burden for you to handle, the franchise route may be a wiser choice.
People tend to purchase a franchise because they see the lesser amount of risk involved and availability of higher growth prospects. . Franchises offer entrepreneurs a stable and tested model for running their business successfully. The success in franchising is nearly 85 percent which is way more when compared to the success rate of startups that is only 53%, in 5 years.
PROS AND CONS OF OWNING A FRANCHISE
There are many advantages of investing in a franchise but it also comes with a few drawbacks. Widely recognized benefits of investing in a franchise include:
A ready-made set of business establishment steps that have to be followed.
A franchise comes with market-tested products and services and also established brand recognition.
You have a set of operational procedures that have been tested and so there is minimum risk.
Most of the franchisors offer training and assistance in financial planning and also provide a list of approved suppliers.
Franchises come with a formula and track record so there is a higher chance to be successful.
The only disadvantage that comes with a franchise includes heavy start-up costs as well as ongoing royalty costs that need to be paid to the franchisor.
HOW TO MAKE A FRANCHISE BUSINESS PLAN?
Preparing, presenting, and defending your business plan as a successful one, both in the short and long run, is a real test of your business vision. A business plan lets you define the goals and objectives of your business in a presentable manner. A Business Plan explains what you plan to do, how much money you need to do it with and how you propose to pay the money back. Your plan will include a Profit Forecast and Cash Flow Model.
1.Introduction
Describe the purpose of your Business and briefly outline the concept it is based upon.
Include your overall business objectives and goals.
Decide on the legal status of your business. Analyze your business model to ascertain which is the right one for your work.
Describe accurately the product or service that your business will offer to the franchisees for sale. Include any relevant history of the product or service and try to avoid any gibberish.
List qualities that make your product or service distinct from what others have to offer and describe your 'Unique Selling Point' (USP). List the key feature which makes your product or service stand out in the marketplace.
Describe how your product or service can be developed in line in case of a market transition.
3.The faculty
You should remember to include details of anyone who will be involved in the success of your business. These people are an asset. This is a key section of your Business Plan that should necessarily be included.
A short introduction of each person, including the assessment of their attributes, strengths, and weaknesses.
Their relevant experience, commitment, and reasons for involvement in your new venture and how are they an asset.
4.The market
This is probably the most important section of the whole Plan - It is extremely important to have a clearly defined market plan for your business to succeed. If you can effectively present this section of your business plan, you will gain credibility for the whole Business plan.
Describe the current condition of your product or service in the marketplace for your product or service.
Detail any relevant facts and figures relating to the market sector(s) that you will be targeting, expected growth ratios, and the type of potential customers who will be purchasing your product or service.
Give details of your competitors in the market and explain why your potential customers will choose your product or service over those being offered by your competition.
This is the point where a lot of research is required. You should make use of all the business information that is available about markets, competitors, and customers.
The marketing plan
A business without a Marketing Plan is incomplete. Your company must have a clearly defined marketing plan that would help in promoting it. It should include:
Your marketing objectives
Where your product or service can be positioned in the marketplace in terms of price, quality, image, and other factors affecting demand.
What are your planned marketing communication methods- advertising, leaflets, and brochures, etc.
How will your product or service be distributed sold eg. Through agents, sales teams, digital marketing, etc.
What customer care policy is planned and how it will work.
Any sector of interest where you have already generated leads or details of any possible orders you have already taken should be included in the appendix. Unless you have a clearly defined market and a potential customer base, you will not be able to successfully work on your business model.
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