Franchise and How Does it Work?
What is a Franchise Business?
Who doesn’t want success in business? Everyone wants growth, progress, that too at low risk. That is why franchise business is becoming popular very fast. There was a time when there was no dearth of people starting startups, but today the number of people starting franchise business is also increasing. But why is this so? What is so special in franchise business? And what is this franchise business? How is it different from a startup? What are its advantages? And are there any disadvantages of it? What kind of process is there in this franchise business? And how much would be the cost of starting such a business? If you want to know all this, then invest the next few minutes on this article because here you are going to get answers to all these questions. So let’s start and know everything about franchise business, which will be useful for you. Franchise is a joint venture between a franchisor and a franchisee. A franchisor is the original business, the one who sells the right to use its brand name and idea is called a franchisee and the franchisee buys the rights of that business so that he can sell the products or services of the franchisor. For this, he has to work under the existing business model and trademark. You must have heard many times that this is the franchise of KFC, that is of Lakme, what does it mean? That a franchisee has bought the rights to sell the goods and services of a brand like Lakme from the Lakme brand and another franchisee has bought all these rights from the KFC brand. So what does franchise business mean? That is, taking a license to use the brand name and trademark of an already established business and starting your own business using the expertise of that brand. Now the company that gave the business license is the franchisor and the one who took the license and permission is the franchisee and the business started in this way is a franchise business.
Franchise vs Startup: Which is the Better Option?
Now let us know what are the benefits of this type of business and how is it different from a startup. So the first benefit of franchise business is that you get the name of an already established brand in a highly competitive market. There is no need to start everything from zero like a startup. The chances of success are high in this, there is support of the parent company i.e. the franchisor. You do not have to do everything alone like a startup. There is not much pressure of marketing because that brand name is already known in the market. The risk in this is also very low in comparison to a startup. Although startup and franchise are two different and excellent business concepts, franchise should be chosen by such a person who wants to move forward while enjoying the guidance of the franchisor at low risk, but at the same time has a sufficient budget to start a franchise and it is easy for him to follow the conditions, rules and regulations of the parent company. Startup is for such a person who is ready to start from scratch, but who wants full freedom, because in a startup he can have full control and command over his business, not in a franchise. In such a situation, he will have to be ready for high risk and high efforts.
How does a franchise business work?
So it means that while franchise business has its own advantages and drawbacks, startups also have their own advantages and disadvantages. And with this comparison, you must have understood whether franchise business or startup will be perfect for you. So, now let’s move ahead and know how franchise business works. To start a franchise, the franchisee pays a fee to the franchisor company and also signs an agreement. And only after the legal formalities are completed, the franchisee can open a new branch of that franchise company. In this business, there is a commercial and legal relationship between the franchisee and the franchisor. Both are responsible for the success of that brand. At the beginning of the franchise business, the franchise company helps the franchisee in training, marketing and product development. With the support of the franchisor, this new franchise business starts growing and both benefit from it. The franchisor gets a franchising fee, using which the brand and business can be taken forward more rapidly. Through this, fast expansion of the business becomes possible. By opening franchises in many locations, the brand gets better recognition and it becomes possible to remain a strong candidate in the competitive market. At the same time, the franchisee gets the training and expertise to run the business successfully and also gets easy access to loans with the help of the franchisor.
Franchise Agreement: Important Clauses
You should also know that this franchise ownership can also be of many types i.e. single unit, multi unit and multi unit area development. Single unit franchise is the most common type of franchise ownership. In this, a franchisee has only a single branch of the franchise, while in multi unit franchise ownership, when a franchisee starts running a branch successfully, then he can also open more branches of the same franchisor company, but when a specified number of branches have to be opened in a specified area in a specific time frame, then it is called multi unit area development and now see that we had talked about some agreement a while ago, which is between the franchisor and the franchisee, to start a franchise business, it will be good if we know a little more about it, so what kind of sections are there in this legal agreement, we should also get some information about this, so let’s know about such sections:
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Trademark Usage: This section lists the trademarks and logos that the franchisee can use, the restrictions associated with these should be carefully observed.
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Franchise Location: This section talks about the areas in which the franchisee is allowed to open a branch. You should check if this location is suitable for you or not.
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Franchise Terms: It contains information related to the agreement in which it should be seen for how long the agreement is, whether as a franchisee you have the right to renew the agreement and other such important information is there in this section, which should be signed only after understanding and being satisfied.
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Fees for Franchise: Talking about this, this section contains information about all the mandatory fees related to buying a franchise. In this way, you can check what is the initial fee, how much is the royalty payment, and many such things.
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Responsibilities of the Franchisor: This section contains the duties and responsibilities of the franchisor which includes: Training Requirements Requirements Related to Participating in the Business Requirements Related to Maintaining and Submitting the Records And further, the Restrictions Imposed section contains restrictions related to products and services which may include important points like quality standards required and shared by the franchisor, list of approved suppliers, the approved sources of advertising and marketing, working hours, price of products and services. Read these carefully as well.
And Agreement Renewal Contract Termination and Transfer of the Agreement This section mentions the rights that the franchisee gets after the agreement, there is detailed information about the franchise agreement transfer and there is also all the detailed information about the franchise agreement renewal. In this way, this legal agreement contains all the important information that you should know about and which should also be suitable for you, so read and understand this agreement thoroughly and sign it so that you do not face any problem in starting the franchise business and the business proves to be a profitable deal for you.
Franchise Business: Opportunities and Cost in India
So after knowing so much about franchise business, why not talk about its cost and business ideas as well. So look, some of the best options among the most popular industries for franchise business in India are:
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Beauty and wellness franchise business is number one. Best opportunities in this are brands like Lakme Salon L’Oréal Javed Habib Salon
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At number two is Food and Beverage Franchise Business. The top brands offering best franchise opportunities in this can be McDonald’s, KFC, Subways and Starbucks etc.
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At number three is Health Care and Diagnostic Centers, here you can get the best opportunities in these top brands Apollo Clinic Dr Batras Thyrocare etc.
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At number four is the retail fashion and jewellery franchise business. The top brands that offer you good franchise opportunities can be Manyavar Retail, Max Retail, Raymond Retail, Biba Retail and Reliance Jolls Etr.
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And at number five is Automotive Franchise. This can also be a strong option as Automotive Franchise is one of the largest and biggest franchise business in India and its top brands that offer franchise opportunities are Car Spa Franchise, Mahindra First Choice Franchise, Hero Motocorp Franchise and BSA Cycles Franchise.
So these were the businesses that hold good opportunities to start a franchise business in India. Now, if you want to estimate the cost of the franchise business, an investment of approximately Rs. 7 lakhs would be required to get the franchise of a brand like Patanjali. A minimum investment of Rs. 30 lakhs would be required for the franchise of Domino’s. If you want to get the franchise of the First Cry brand, then the minimum investment would be Rs. 25 lakhs. For the franchise of Lakme business, a minimum investment of Rs. For the franchise of Doctor Batra Clinic, an investment of 25 to ₹ lakhs will be required. For the franchise of a brand like Fab India, an investment of 40 to 50 lakhs will be required and for the franchise of Hero Motocorp, an investment of 50 lakhs to 1.5 crores will be required. For the franchise of DTDC Courier, this investment can be ₹ lakhs. However, it is to be kept in mind here that you can get variations in this minimum investment cost and this is the franchise cost of top brands. Apart from this, there are many such successful brands whose franchise can be available in your suitable and expected budget. Therefore, before choosing the industry and brand for the franchise, do market research. Understand the competition, move ahead keeping in mind your interest and budget and approach the right franchisor to start the best suitable franchise business for yourself.
Conclusion: The Road to a Successful Franchise Business
If you keep all these things in mind and move forward with a little risk taking attitude, then you will definitely get success and that too very soon and now you have also got information related to franchise business, so take full advantage of it and if you find the article helpful, then definitely like it and share it with friends as well as write in the comment section and tell us how you liked this information.
