Franchise
Franchise is a type of business system whose owners, by obtaining royalties from the main company, will be allowed to operate under the shadow of that company and use its trademark, sell products, or use its business systems.
Franchise-based businesses are not considered independent. Because they do not have the right to change the nature and policy of the main business. But at the same time, they have a way to achieve success that the main business owner has already tried and is sure of its effectiveness.
In the franchise business model, we are dealing with a set of small businesses that all operate under a single title and a common nature. The head of this business branch, i.e., the franchisor, in addition to the right to use the brand name and sell products, also offers suitable conditions and methods for management to its subsidiaries. Also, with trainings and practical guidance, performing quality control process, providing business strategies and marketing, it enables people to do business as well as possible.
Advantages and Disadvantages of Franchise
Engaging in this type of business has advantages and disadvantages for both the franchisor and the franchisee. In the following, we describe each of these materials separately:
Advantages
a) For the Franchisee
1. No need for rebranding
2. No need to design strategy and business model
3. Less risk
4. No need for expensive marketing processes
5. Having the support of the main company
6. Reducing the time for the business to be known to the public
b) For the Franchisor
1. low-cost development; Because business development alone requires spending more money.
2. Using the funds received from franchisees in the way of marketing and advertising.
Disadvantages
a) For the Franchisee
1. Lack of independence at work
2. Dependence on a particular brand
3. Lack of intellectual property
4. Spending a lot of energy and work
5. Working with strategies predetermined by others
b) For the Franchisor
1. Harder management of your subcategories
2. It takes time to make changes and new technology
Types of Franchise
In general, we face 4 types of franchises in the business space
1. Unique Franchise
This type is the most common and simplest mode of franchise; Because the franchisor grants only one unit to the franchisee. But in some cases, after opening a unit and its prosperity, the franchisee requests to grant the reopening of another unit.
2. Multi Franchise
Unlike the previous case, in this type of franchise, the franchisor grants the franchisee the franchise to set up several units. In addition to the agreements made, there are specific time frames for setting up each unit.
3. Regional Franchise
This case is slightly similar to the previous case. In this type of franchise, we are faced with the granting of many privileges. with the difference that the opening of different units takes place in a specific regional area. For example, the privilege of reopening 5 units within 5 years in Tehran province. It is also necessary to note that during these 5 years, the opening of the relevant units is exclusive to the franchisee.
4. Advanced Franchise
In this type of our franchise, in addition to having the right to open a representative office in a certain area, the franchisee can grant permission to others to open a representative office.
Up To Sum
Granting a franchise is one of the ways to develop a business. However, a step in this direction requires the design of reliable financial and commercial strategies in line with the business. In addition, familiarity with different types of franchise can be a guide in concluding contracts related to this field.
