Why franchise?
Once you are sure that you have a product or a service that sells and you are a fairly known brand, the next thing on your mind would be to grow your business as fast as possible. However, there could be limitations to growth in terms of resources such as time, money and manpower. Franchising is the way out, as it would reduce your burden to be physically present at all places and at all times.
“We deal in a perishable product—fresh flowers—and we realize that the presence of the owner is very important to run this business as we can’t be present in every city. Going in for the franchisee model is the best thing,” says Gadia, who claims that his franchisees can make anywhere between Rs 50,000 to Rs 5 lakh a month.
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| If the entrepreneur does not read the opportunity properly, he will lose the initial investment. Name can get tarnished as the customer does not differentiate between a franchisee and a company-owned outlet
Amit Nahar |
The franchising model eliminates several layers of supply chain. It means you have extra margin, which can bring extra profit.
Gaurav Marya |
Franchising also comes in handy when you have less money to grow on your own. Taking a debt or parting with a share of your company with the investor is not always a great idea. Therefore, franchising helps you minimize the risk and brings in the capital by those entrepreneurs who want to work on a tested business model. So in a way, franchising is like creating a network of entrepreneurs who have the wherewithal to run a business successfully, but do not want to start from scratch.
Franchising is also less time consuming. You don’t have to bother yourself with looking for property and understanding customer behavior of a particular city or region. This will be taken care of by the person who wants to run your franchisee. So it saves time too.
Gearing up to franchise
Before you decide to franchise your business, it would be a good idea to check on your preparation. Ask yourself questions such as do you have a proven business model that would create enough revenue for someone else so that he can share it with you.
“Check if the product is successful, the brand is known and adequate and robust systems are in place that will ensure that the franchisee route will be successful,” says Pramod Khera, VP, Franchising Association of India. “I would call it the environment. The success of a franchisor would depend on how strong this environment is,” he adds.
Running your own outlets for some time to test waters would also be a good idea. “We first created our own seven to eight stores before we could even think of franchising. There is an investment first of all in creating a sellable and workable product or a service, only then you can talk about franchising it,” says Gadia.
“You need a standardized product, a strong brand image, a clear operations manual on how the business would be run. Only then you should go about appointing franchisees,” says Saxena. Initially, the franchises would need a lot of support from you. So it becomes important to check if you have a viable support structure in place.
| Keep In Mind |
| Strong and replicable processes are at the core of a successful franchise model |
| Standardization is one of the main requirements for a franchise to succeed |
| Franchisee pays an upfront fee for the license plus revenue share as royalty |
| Franchiser provides marketing and branding support, training and raw material inputs, etc |
Risks involved
The person who takes your franchisee is the one who could make or break your business. Therefore, the biggest risk is that you appoint a wrong person on the job. If he is not able to run the business, eventually you lose money. Therefore, it becomes all the more important that you get the right person to run your franchisee outlets.
Money is not as important as your brand. You have to keep a vigil that your brand name does not get tarnished. “If the entrepreneur does not read the opportunity properly, he will lose the initial investment. Name can get tarnished as the customer does not differentiate between a franchisee and a company-owned outlet,” says Amit Nahar, franchising consultant and CEO, Sparkle Minds.
Another risk could be in the form of cheating. Your franchisee could be making more revenue than you think, and sharing less with you. This would mean that you stand to lose financially. It makes sense to devise a mechanism to keep track of the revenue that flows in. Educational institutions such as NIIT ensure that they give the study material and the final certificate to their franchisees. This helps keep track of the number of students enrolled for the course by their franchisees.
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written by Pinki Talukdar, November 12, 2010
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written by GRH Education, June 10, 2010
We offer our clients a host of services, which can range from a minor part extending to the entire project in any of the projects mentioned below:
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For more details, log onto www.grheducation.com
written by joleng16, April 26, 2010
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