Chapter 2: How Franchising works
Franchising has become a proven business model and it has become a highly
successful marketing tool for all aspiring entrepreneurs. If statistics are anything
to go by, franchising contributes approximately 3 trillion USD every year in retail
sales and approximately 1 out of every 16 people are employed in the franchising
industry.
During times of the economic downslide most people fear losing their jobs and
getting laid off. So they start looking for other means to ensure their
independence and stability. Franchising is a great way for such people to ensure
their independence and financial growth even in such an economic scenario.
Franchising is basically a concept used to describe a situation where the
organization that is franchising (also known as franchisor) provides necessary
support, training and a limited “license” to a businessperson (franchisee) to sell
the products and services manufactured by the franchisor. Since the franchisee
is a part of the parent company, he or she has to use the brand imagery, and
other attributes pertaining to the parent company’s brand.
An initial investment is required to be provided by the franchisee in return for
which, the franchisor provides all the requisite support and training needed for
the franchisee to get started. This is a great marketing tool because all the
necessary infrastructure, supplier network and business plan is already in place.
All the franchisee needs to do is try and sell the products and services of the
parent company.
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