On a hectic day in the peak summer season a franchisor contemplates the business plans for the coming year. There are new franchisees to be awarded, old ones to be renewed and new areas to be reached to. The royalty has to be collected, business proposals for likely-to-become partners are to be made, plus the promotion of the business (brand) and more. This is what goes on in the head of the franchisor.
Now, why would someone be so interested in making for all these arrangements and laboriously help others to establish their business?
Business expansion by franchising is one of the most suitable options nowadays. It is suitable to both the franchisee that buys the franchise unit and the franchisor. Consider the situation wherein a person or a group of people owns a renowned brand.
They are the owners and are responsible for everything related to the brand. They have to manufacture the brand or provide services, do the quality assessment and control, efficiently market their products or services and do all post sale services. That is what is required for a single unit. If the same unit is multiplied say hundred times, meaning that the brand owner has, say 100 outlets, it would be real difficult to manage all of them effectively. That is where franchising comes in helpful.
Business Expansion with the help of Franchisee. Now that we know how and why a franchisor provides the opportunities of operating the business to franchisee, still what needs to be known is whether the franchisee can expand to the same capacity as franchisor or not.
To know that you must first know different franchisee models. The most accepted one makes for provisions that allow two kinds of franchisee deals – the unit franchisee and the master franchisee. Unit franchisee does not allow for business expansion. The buyer or owner of the franchisee actually owns the right to do business in a particular specified area utilizing the given brand and services. The owner can just operate a single unit and if he wants to open a new one he has to seek a new franchisee unit from the franchisor.
Master franchisee also has the right over a specified area, but the actual area or territory can be large and the franchisee can further award franchisee to other interested parties. Therefore master franchisee has greater benefits and can help in the business expansion.
Business franchising is a legally accepted model and there are some practices protected under law.
There are many other ways of business expansion. However, franchising is preferred because it is easily manageable and incurs least investment on the part of franchisor.