Franchise Model
BeginnerA franchise model is a business model in which a company, the franchisor, allows independent business owners, the franchisees, to operate outlets under its brand and system in return for fees and royalties.
Many fast-food chains, hotels, gyms and retail brands grow through franchising. The franchisor provides the brand, products, operating procedures, training and marketing. The franchisee invests their own money to open and run the outlet, following the franchisor's rules.
Franchisees usually pay an initial fee to join, ongoing royalties based on a percentage of sales and contributions to a shared marketing fund. For example, a franchisee might pay a 40,000 joining fee and 6% of monthly sales as a royalty.
For the franchisor, franchising allows rapid expansion without having to fund every new location, and provides steady income from royalties. For the franchisee, it offers a proven business system and a recognised brand, which may reduce the risk compared with starting from scratch.
There are trade-offs. Franchisees have less freedom, must pay ongoing fees and depend on the franchisor's reputation. Franchisors must maintain quality and consistency across many independently run outlets, since problems at one location can damage the whole brand.
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