Franchising

Tarang Khurana
When do companies go for franchising?

·         Lack of Capital

·         Lack of People

·         To have a rapid growth of business

What actually is franchising?
Primarily franchising is a way to grow your business with other people’s money. What it does is that, it allows someone to come to you and say that they are really interested in what your company does and they want to mimic this in their own location, basically those people approach you who think they get the ‘WHY’ of your business. So, they proceed by bearing all the costs to open in another location and you don’t have to dish out a dime of your own money, in fact they pay you something called the franchise fee upfront. This fee should not only explain the opening of doors for the new outlet but it should also explain the covering up of costs and translating them into profits
What essentially happened here is that your brand got the initial cash to set up a new outlet all-together, plus they share the same vision as you do and hence you also get almost a free branding and publicity
There’s another constant source of added income that you earn when you have a franchise set up and that is in terms of per unit revenue of that outlet. And this income is constant as it doesn’t depend on the profits, also it is paid almost weekly or monthly according to the guidelines of the deal.
How do they maintain Quality Standards?
Well this is the most significant step in ensuring the brand name to hold up. For maintaining quality standards all the hired employees of the franchise and the franchise owner has to go under at-least a month’s training under the guidelines of the franchisor to know the ins and outs of the business.
Why do businesses prefer franchising over organic growth?

·         Helps prolong shutting down of business

·         Neatly spreads your liabilities

·         Helps come up with diversification and new products in the same field

·         Improves flow of business because someone with the same vision targets the same problem with a different perspective.