- Artificial Intelligence
- Business Operations
- Cloud Computing
- Data Center
- Data Management
- Emerging Technology
- Enterprise Applications
- IT Leadership
- Digital Transformation
- IT Strategy
- IT Management
- Diversity and Inclusion
- IT Operations
- Project Management
- Software Development
- Vendors and Providers
- United States
- Middle East
- United Kingdom
- New Zealand
- Data Analytics & AI
- Foundry Careers
- Member Preferences
- About AdChoices
- Your California Privacy Rights
- Network World
A new model for business presentations
How great presentations emerge.
Joi Ito, the director of the MIT Media Lab, and Jeff Howe wrote a book called Whiplash: How to Survive our Faster Future . The book concerns itself with a set of basic management principles that they believe govern the successful development and evolution of new technology. I think these principles fairly represent current perception and support what are generally accepted in tech today as virtuous practices. The principles are presented in a kind of yin and yang pairing of binary and opposing forces.
One of those pairs is emergence over authority. The authors argue in favor of emergence over authority as the source and nutrient of ingenuity and innovation in technology. Their discussion is pretty well restricted to the theoretical plane (they offer little in the way of practical advice for fomenting emergence beyond “if you observe it, encourage it.”)
Here I want to show how emergence over authority is at work in the business presentation and how emergence can be encouraged with the practical application of the principles of live performance which I advocate.
The model must change
The traditional model guiding business presentations rests almost entirely on what I call the Authority of Office and category expertise. The voice of authority is presumed in the presenter because in older hierarchical organizations the presenter is very often the boss or team leader. If not the boss, they are presumed to be the category, company or industry expert. The audience pays attention and follows the direction offered in the presentation because it is their job and responsibility to do so. Even the word we use, “presentation,” suggests a formal, one-way communication.
But tech companies today are less likely to be rigid, formal hierarchies. They tend to be flatter. Most of us now have more colleagues than employees or direct reports. Working groups are increasingly ad hoc. We create teams on an as-needed basis that change dynamically as projects progress and evolve. We have more temporary assignments and work with or under the direction of a quick succession of project managers or business owners. We have more remote employees who work remotely or independently and may be on site only occasionally to attend a meeting or presentation. As a result, contributors to any initiative are less vested in long-term personal relationships (or annual reviews from a single manager they may be working under for only the next two months). Independence of thought, solution and action are encouraged as we all have fewer external imperatives to take direction.
Information and expertise are also distributed more broadly. It is increasingly less frequent that any one person has all the knowledge or expertise necessary to understand or accomplish any significant business initiative. There is simply no way any one person can know everything. Individuals may possess a narrow knowledge or skill set that is critical, but only to a single facet of larger overall projects.
As a result, most of the audiences you face today are peers, not subordinates, who collectively possess nearly as much if not more than you do. The old authority model for presentations can become a source of anxiety for many presenters. They are less likely to be seen by the audience as the person who has all the answers and that may explain why the top concerns expressed by tech managers continue to include: “that I do not have all the information,” “I will not have the information the audience expects,” “I will be asked questions I don’t know the answer to,” etc. The voice of authority seems to have abandoned them, and presenters are at a loss for confidence.
An emergence model
So that means we require a new way to think about the business presentation; one that is focused more on persuasion and invitation than revelation and directive; a model that is less overtly didactic and that values the knowledge and experience of the audience as much as the knowledge of the presenter.
A business presentation is a live performance and the live performance is first and foremost a shared experience between the presenter and the audience. The intent of the presentation is to transform the audience’s thinking, not command their obedience. The live performance model recognizes that the audience plays a role in that experience. The live performance model invites questions from the audience. It allows for contributions to be made by the audience and for ideas to emerge from the audience.
If members of the audience possess key knowledge that is essential to the shared experience and the goals we are trying to achieve, and if they are to become actors in the implementation of decisions and realization of those goals, then it is important for the presenter to describe active roles for those audience members in a project narrative which invites and allows the audience to make those contributions: that make meaningful response on the part of the audience possible. That is the way we move audiences to action.
The new voice of authority comes from skillful management of the presentation experience. The presenter serves as the catalyst between the audience and the content of the presentation. The goal of the presenter is to reach their audience, transform their thinking and move them to action. That is how great presentations are allowed to emerge.
How to embrace speaking in public, what about toastmasters, everything is improv, what about ted talks, from our editors straight to your inbox, show me more, the raci matrix: your blueprint for project success.
What is an SLA? Best practices for service-level agreements
United Airlines gives employees the digital tools to make customers happy
CIO Leadership Live with George Eapen, Group Chief Information Officer at Petrofac
CIO Leadership Live with Marc Hale, Chief Technology Officer, AIA NZ
CIO Leadership live with TAB's Fred Laury
- Lenovo Late Night I.T. - Emmy-nominated host Baratunde Thurston is back at it for Season 2, hanging out after hours with tech titans for an unfiltered, no-BS chat.
- dtSearch® - INSTANTLY SEARCH TERABYTES of files, emails, databases, web data. 25+ search types; Win/Lin/Mac SDK; hundreds of reviews; full evaluations
- Discover why the worlds most essential organizations rely on NETSCOUTs Visibility Without Borders platform to keep their networks secure, available, and unstoppable.
Starting a Business
- Business Plans
- Real Estate
- Business Models
- Business Ideas
- Side Hustle
Growing a Business
- Business Process
- Operations & Logistics
- Employee Experience & Recruiting
- Business Culture
- Thought Leaders
Science & technology.
- Social Media
- Business Solutions
- Data & Recovery
Money & Finance
- Debt / Loans / Refinancing
- Cryptocurrency / Blockchain
- Buying / Investing in Business
- Personal Finance
- Health & Wellness
- Celebrity Entrepreneurs
- Resumes & Interviewing
- Making a Change
- Franchise Advisors
- Franchise 500 Annual Ranking
- Featured Opportunities
- Find a Franchise
- Franchise Suppliers
- Buy a Franchise
- Grow Your Franchise
- Franchise Your Business
- Franchise News
- Find Success
- How to Go Green
- Latest News
- New Products
Copyright © 2023 Entrepreneur Media, Inc. All rights reserved. Entrepreneur® and its related marks are registered trademarks of Entrepreneur Media Inc.
A Canadian cosmetics franchise expands to the United States.
By Karin L. Henderson • Nov 1, 1999
Opinions expressed by Entrepreneur contributors are their own.
A good face can charm a photographer, win a cardgame . . . or capture the attention of thebusiness world. Take a look at FACES Inc., the Toronto-based retailcosmetics franchise and distribution system that has recentlyreceived a makeover.
Behind the upgrade of the 25-year-old company is new managerFlagship Capital Partners Inc., a merchant banking company whichhas re-branded and repositioned FACES. "We wanted a systemthat's exportable, universal and recession-proof, and FACES metall those criteria," says Flagship and FACES chair andpresident Grant D. Roebuck. Improvements include store design andpackaging changes, a four-week certificate training program, and adetailed customer database allowing better franchisee/customerrelationships.
Continue reading this article — and all of our other premium content with Entrepreneur+
For just $5, you can get unlimited access to all Entrepreneur’s premium content. You’ll find:
- Digestible insight on how to be a better entrepreneur and leader
- Lessons for starting and growing a business from our expert network of CEOs and founders
- Meaningful content to help you make sharper decisions
- Business and life hacks to help you stay ahead of the curve
Editor's pick, most popular, the founder of this snack brand totally messed its name up. here's how he fixed it..
Turns out, most of us don't want to be reminded that we're eating a chip made out of a bird.
By Jason Feifer
SVB Insider: Employees Angry With CEO Greg Becker
An anonymous employee called Becker's actions "absolutely idiotic."
By Steve Huff
A 'Quiet Promotion' Will Cost You a Lot — Use This Expert's 4-Step Strategy to Avoid It
Ginni Saraswati, CEO and founder of podcast production house Ginni Media, reveals how to make sure you're not leaving any money on the table.
By Amanda Breen
'It's Not the Wealthy Taking the Hit': Mark Cuban's 'Baby' Among Companies With Millions In Silicon Valley Bank
The billionaire took to Twitter late Friday to sound off amid the collapse of SVP.
By Emily Rella
The Best Way to Run a Business Meeting
All too often, meetings run longer than they should and fail to keep attendees engaged. Here's how to run a meeting the right way.
By Jacqueline Whitmore
Working Remote? These Are the Biggest Dos and Don'ts of Video Conferencing
As more and more businesses go remote, these are ways to be more effective and efficient on conference calls.
By Bryan Lovgren
Successfully copied link
- Super Guides
- Search for:
No products in the cart.
Types of Business Models
Franchise business model.
The franchise business model is usually the business model chosen by those who want to start a new business, but do not have much idea how to begin it. That is because the franchising system allows you to acquire a ready-made business, with a consolidated brand and know-how already tested. Virtually, you buy a brand and all the processes. That way, since you don’t have to start from scratch, there is no need to test the entire business model from the beginning. You basically invest in a ready-made business and apply its processes and techniques to the location you choose. On the other side, the business owner benefits from not having to invest in new outlets or units. Instead, they distribute their goods or services through licensed sales points, thus increasing their brand presence.
What is the franchise business model?
The franchise business model is totally based on the relationship between two sides: the franchisor and the franchisee. The franchisor is the person or company that owns the rights to a brand trademark. The franchisee is the one that pays a fee in order to use the franchisor’s trade name and operating systems. This relationship is built on mutual understanding and support. Take a look:
- Sells the rights to franchise their brand;
- Develops the business, with its brand and operations;
- Provides a recognizable trademark;
- Offers training and support;
- Creates a marketing strategy;
- Sometimes mentors the site selection and structure.
- Pays the franchisor a fee that can be an initial or recurrent payment (royalty);
- Operates in accordance with a specified contract;
- Acts as a branch of the franchise company;
- Gains access to an established customer base;
- Benefits from brand recognition;
- Takes advantage of a ready-made business with all its know-how;
- Runs the day-to-day business.
The Franchise Business Model Canvas
To download Franchise Business Model Canvas today just enter your email address!
A brief history of franchise business model
The franchise business model is not recent. On the contrary, it dates back to the Middle Age and ancient China, when landowners allowed peasants and serfs to do business on their property – such as hunting or selling products at fairs – as long as they paid a kind of tax or commission on business done in their territories. The modern business model franchise is supposed to have started with Benjamin Franklin when he made an agreement with Thomas Whitmarsh to provide printing services in Charlestown, South Carolina, in the year 1731. More than a century later, Isaac M. Singer would again use the franchise business model to distribute his Singer sewing machines. But the model would only become popular after another hundred years, with the appearance of McDonald’s. Nowadays, there are thousands of od franchises all over the world.
Types of franchise business model
There are two types of franchise business models. They are:
Product distribution franchise
In this model, the franchisor is also the manufacturer of the product, which will be sold by the franchisee. I t is similar to a supplier-dealer system, however, with the difference that the franchisee must sell that brand exclusively, and cannot resell others simultaneously. For example, John Deere and Ford Motors.
Business Format Franchise
This is the most recurring business model franchise. In addition to using the franchisor’s trade name and brand, the franchisee has access to marketing and sales strategies, distribution and operations systems, as well as training and support. Some examples include Dunkin Donuts and McDonald’s.
The advantages of the franchise business model
For the franchisee.
- Quality brand-recognition
- Expert support and training
- Established customer base
- Proprietary technology
- Location assistance
- Operational guidance
- Marketing and advertising
- Access to a network of fellow franchisees
- Shorter time to opening
For the franchisor
- Quick brand expansion – through other people’s money
- Growing without sacrificing control
- Stable revenue stream
- Savings on operational costs
Disadvantages of the franchise business model
The downsides of the franchise business model are more specific to the side of the franchisees. They may include lack of independence on how to run the business, some mandatory national or regional strategies and promotions that may not work in the franchisee’s market, high cost of implementation, and others. Of course, like any other kind of business, there is no guarantee of success in the franchise business model. Sometimes, franchisees believe that, just by following straightly the franchisor’s system and operations, their business will be profitable. Buy that is not actually true. Not everyone is cut out for franchising. It is indeed a business model based on a kind of partnership. So, both sides need to be comfortable about the franchise business model, regarding the company culture, values, goals, mission, etc. Franchising is like a marriage, they must share mutual ideas over the long term, in order to be profitable and successful.
The future of franchise business model
Artificial intelligence will play a bigger role. Probably technology will take over many ordinary tasks that don’t require skilled human resources. It is the case of some fast-food franchises, for example, which have already been using computers to get customers’ orders – sometimes, even remotely. Franchises will grow around the world. Franchises have been rapidly expanding over the planet. Countries that did not exist for some companies, a few years ago, have become new and profitable markets for foreign franchising investments. Remote franchises have become popular. Last but not least, with the advance of technology associated with the coronavirus pandemic, some remote franchises have taken a bigger market share, due to the tendency of working from home.
Leave a reply.
Your email address will not be published. Required fields are marked *
Username or email address *
Remember me Log in
Lost your password?
The Leading Source of Insights On Business Model Strategy & Tech Business Models
What Is A Franchising Business Model?
Franchising is a business model where the owner (franchisor) of a product, service, or method utilizes the distribution services of an affiliated dealer (franchisee). Usually, the franchisee pays a royalty to the franchisor to be using the brand, process, and product. And the franchisor instead supports the franchisee in starting up the activity and providing a set of services as part of the franchising agreement. Franchising models can be heavy-franchised, heavy-chained, or hybrid (franchained).
A business model or a growth strategy?
As the story goes McDonald’s started to use a franchising model to grow its restaurant business, and it became over the 1960s a giant in the restaurant business (or real estate depending on the perspective).
McDonald’s leveraged the existing “ Speedy Service System ” developed by the McDonald’s brothers (what we would later call “fast food”) which was an incredible process development able to provide an improved product at a faster pace.
The speedy system itself represented the application of the manufacturing process to the restaurant business. Later another important building block was added.
The franchising model really became widely applied during the 1920s and 1930s in the restaurant business.
As new physical communication networks (in the US, the Interstate Highway System) enabled people to move long distances with their cars.
Later on, Ray Kroc would apply, in its most aggressive form, the franchising model (different formats already existed centuries before) to McDonald’s existing operation to create one of the most scalable restaurant businesses in the world.
But is franchising a business model, a revenue model, or a growth (expansion) strategy ?
Well, franchising alone is just a distribution /growth/expansion strategy .
Yet, franchising combined with a product delivered differently (the “speedy system”) made up a whole new experience that made it a new business model: the heavily franchised McDonald’s business model.
Therefore, as we’ll see throughout this research, franchising here is considered a business model, as it embraces product, distribution , and growth as a whole.
Modern franchising, as conceived in today’s business world, came as a bio-product of the incredible expansion of the restaurant chains business across the US, like the automobile and the infrastructure of highways built around it, also enabling people to travel distances to go to their favorite restaurants.
From there, especially after the 1950s, franchising was used as a great way for restaurants to expand their operations across the country.
This model today, while it has become a standard, it’s all but a unified model.
In fact, as we’ll see, several companies mastered it and tweaked it to make it in line with their business philosophy, growth model, and strategy .
When a business is looking for a cost-effective means of increasing market share or geographical reach, it may opt to franchise its product and brand name.
Franchising is essentially a joint venture between a franchisor and a franchisee.
The franchisor is the original business that sells the rights to its name, idea, brand, or systems.
The franchisee then buys these rights, which allows it to sell the franchisor’s goods and services under an existing trademark and business model.
The franchise business model itself is an attractive proposition for franchisees, particularly those wanting to leverage the brand equity of a franchisor in a highly competitive market.
Franchising is thought to have originated in the United States, with the model first implemented by the Singer sewing machine company in the mid-19 th century.
Today, some of the world’s leading fast-food restaurant companies utilize the franchise model.
These include McDonald’s, Dairy Queen, Taco Bell, Dunkin’ Donuts, and Jimmy John’s Gourmet Sandwiches.
In the United States alone, the franchising industry employs approximately 8.67 million people across more than 785,000 establishments .
Some of the key points to take into account when it comes to franchising:
Franchising can work for sure as a growth propeller as you can easily increment the speed of opening up new locations by also reducing initial capital requirements, operational costs, and time to market.
While franchising is a great model to speed up operations and test new markets. It also comes with the loss of control over products, brands and standards when executed too fast.
As we’ll see throughout this research, different franchising models have come up over the years to make up for the loss of control over speed (like McDonald’s land operations trying in franchisees and making them accountable for the company’s best practices).
The speed of execution is definitely one of the key advantages of the franchising model.
And as the market widens up or shrinks, a franchising model can help the company adapt fast, as locations can be open or closed according to market trends.
While franchising is a great model for increasing the growth of the business. It might also come at the expense of product development.
Imagine the case of a company only running franchised stores that loses the understanding of the customer.
Instead, as we’ll see, franchising models have adapted also to leave a small percentage of owned stores, where the franchising company can experiment and test new product lines.
Also, here, franchising can make or break a whole brand.
And this all depends on whether the company has been able to balance out the speed and ability of the franchisees to stick with the company’s standards and be true to the company’s mission.
How franchising agreements work
Like any agreement between two parties, successful franchising depends on both companies demonstrating professional competence and acting in good faith.
To some extent, this can be facilitated by:
A code of conduct
Which sets out how each party must act toward the other.
Most codes outline disclosure requirements, a good faith obligation, a predetermined cooling-off period, dispute resolution mechanisms, and procedures for ending the agreement.
In addition to the code of conduct, franchise parties are also required to act in accordance with laws and regulations.
In general terms, franchising agreements must operate within the bounds of fair work legislation, relevant tax laws, state licensing schemes, and anti-competitive conduct guidelines.
As we’ll see, franchising agreements will take different shapes according to the company’s franchising model.
The three main types of franchising
Within the franchising model itself are three different types:
- 1 – Traditional franchising
In traditional franchising, the franchisee sells products manufactured by the franchisor.
This arrangement appears at first glance to be rather similar to a supplier-dealer relationship. However, this is not the case.
The traditional franchise is more closely associated with the franchisor’s brand and generally receives more services than a dealer would from its supplier.
For example, The Coca-Cola Company manufactures and bottles soft drinks before selling them to franchisees.
The Ford Motor Company offers regular maintenance and servicing for Ford vehicles bought at franchise dealerships.
- 2 – Business-format franchising
The franchisee under this second model receives a complete system for delivering the product or service of the franchisor.
The role of the franchisor is to define the business system and establish the brand standards, while the role of the franchisee is to manage its day-to-day activities within those systems and standards.
Domino’s doesn’t franchise pizza any more than McDonald’s franchises hamburgers.
Both companies use business-format franchising to streamline the systems for delivering their branded products and services amongst franchisees.
- 3 – Social franchising
Social franchising is the newest franchising type and is the application of business-format franchising techniques in the delivery of products and services to disadvantaged people.
Companies that engage in social franchising provide basic items such as drinking water, pharmaceutical drugs, and other items related to healthcare, education, sanitation, and energy.
The franchising arrangement itself is often with a not-for-profit organization, religious institution, or government body.
Other types of franchising based on the FourWeekMBA research
Beyond the classic configuration and categorization of franchising business models, the FourWeekMBA research identified three main types of franchising models, mainly swinging between a model where most restaurants are owned (skewed toward a chain model) or a model where most restaurants are franchised or a hybrid model.
- Heavy-franchised business model
McDonald’s follows what can be defined as a heavy-franchised business model .
Many have argued over the years that McDonald’s is more of a real estate company than a restaurant company.
Why is it the case?
While McDonald’s does use a heavy-franchise model, where most restaurants are franchised (McDonald’s keeps a low ratio of chain restaurants where it can also do product development and discovery, which then gets extended to its franchised restaurants), there is a twist.
McDonald’s secures the land or the rental contract of the land; therefore, the franchisee, even if an “independent restaurateur,” is locked into McDonald’s growth plan.
Indeed, one of the risks of a franchising strategy is the loss of standards, especially related to product quality.
To prevent that, McDonald’s controls the land, thus making sure that the franchisee is aligned with the product’s standards.
In addition, starting a McDonald’s franchising operation might be quite expensive, and it might require substantial experience.
Therefore, this works as friction at the onset, which should motivate to open McDonald’s restaurants only those who really have solid growth plans.
In fact, as McDonald’s highlights , an initial investment to open up a restaurant might range from $1,008,000 to $2,214,080 (including a $45,000 franchise fee), and at least half a million of liquidity available to be invested into the business.
Franchisee can’t go on and open a McDonald’s on its own, instead, the land lease agreement has to go always thourhg the company.
In fact, McDonald’s keeps them separated.
On the one side, the land development process; on the other side, the franchisee selection and operations.
On the one hand, the company has a real estate arm dedicated to the selection of lands for developing new restaurants. As the company highlights :
McDonald’s looks for the best locations within the marketplace to provide our customers with convenience. We build quality restaurants in neighborhoods as well as airports, malls, tollways and colleges at a value to our customers.
Some of the key criteria for restaurant development are:
- 50,000+/- sq. ft.
- Corner or corner wrap with signage on two major streets.
- Signalized intersection.
- Ability to build up to 4,000 sq. ft.
- Parking to meet all applicable codes.
- Ability to build to a minimum height of 23′ 4″.
When it comes instead to the franchisees, McDonald’s offers a proven playbook and process to create a money-making restaurant machine.
- McDonald’s does use a heavy-franchised model. However, the company has tweaked the model to quickly expand its operations through franchising, while at the same time keeping control over standards followed by the franchisees, as McDonald’s operates as the landowner/operator.
- This tweak is extremely important as it helps balance out the otherwise too-aggressive franchising strategy , which is great for growth, but it might result in a loss of control over process and product quality standards.
- For that, McDonald’s has created two separate operations arms: one is a real estate development unit to develop the restaurant land; the other is the franchising operations to select franchisees and help them kick off operations.
That might also explain the high EV/Revenue Multiple of McDonald’s in the last years, as it rolled out a heavy franchised strategy.
- Heavy-chained business model
McDonald’s has found a balance between quick expansion and opening of new franchising by owning the land where franchisees operate and locking them in through contractual agreements, thus making sure they respect the group’s best practices.
Other restaurant chains, like Chick-fil-A, use the opposite model.
While growth in opening new locations is much slower compared to the fast pace players like McDonald’s, the focus is on ensuring the store is successful.
In fact, the initial fee requested from franchisees is way lower compared to McDonald’s ($10,000 vs. $45,000):
While the entry fee is lower, operating Chick-fil-A franchisees will have to pay a 15% royalty fee.
As the company explains in the franchise disclosure document as 15% of franchised restaurant sales, fewer amounts charged to franchisees for equipment rentals and business services fees, and 50% of net profits.
In short, the Chick-fil-A franchising model has the following features:
- It doesn’t require a net worth, compared to other franchising operations such as McDonald’s, as it’s the company that undertakes the expenses to open up a new restaurant.
- The franchising fee (entry fee) is just $10,000, compared to, for instance, McDonald’s $45,000 fee.
- However, the franchisee has to pay 15% of the net sales and 50% of the net sales.
- This makes sense as the franchisor and not the franchisee is the owner of the business, where the franchisee primarily operates the business.
- Therefore, the Chick-fil-A franchising operations look more like a chain model, while it skews its playbook in finding the right people to operate the business. In fact, of the applicants, only a tiny percentage of those make it up to become franchisees.
- Hybrid or franchained business model
The Coca-Cola Company has mastered a franchising model, which also works as a go-to-market strategy, which we defined franchained :
As we highlighted in the Coca-Cola business model analysis :
Coca-Cola follows a business strategy (implemented since 2006) where through its operating arm – the Bottling Investment Group – it invests initially in bottling partners’ operations. As they take off, Coca-Cola divests its equity stakes, and it establishes a franchising model , as long-term growth and distribution strategy .
While in the directly owned bottling facilities, Coca-Cola sells directly, in the concentrate operations, independent bottling partners manage distribution .
Therefore, Coca-Cola makes money by selling its concentrate to bottling partners ( they must place a full order for the concentrate available in that territory as part of the bottling agreement ).
As exemplified below, this is how the whole system works:
An opposite scenario might be that of using the franchising model in the short-term to test whether new markets are profitable by reducing the operational costs required to open new units and by speeding up the growth while internalizing them in the long run, if they turn out to be successful and strategic for the company.
This will work as a reverse franchained model.
The key differences between franchising and licensing
Franchising and licensing are similar in that they are both types of business agreements where one party pays another for the use of brands, trademarks, technology, and other business systems.
Most of the differences between the two approaches relate to the level of control and underlying intent of the transaction itself.
These differences can be summarised in the following points:
Level of control
In a franchise agreement, the franchisor has broader control over how the franchisee uses its brand and operates.
In a license agreement, the licensee has access to the licensor’s intellectual property and has more control over how that property may be used.
Franchise agreements exist primarily for the franchisor to grow its brand in a relatively passive way using established systems.
License agreements, on the other hand, are favored by independently run businesses that simply want to monetize certain technology or trademarks.
In the United States, franchise agreements are governed by state and franchise law.
However, it is general contract law that governs license agreements.
- Franchising is a business model where the owner (franchisor) of a product, service, or method utilizes the distribution services of an affiliated dealer (franchisee). While most associate franchising with fast-food chains, the model can be traced back to the Singer sewing machine company.
- Franchising as a business model can be split into three types: traditional, business-format, and social. Most franchising agreements in place today are business-format agreements.
- Franchising is only successful if both parties act professionally and behave appropriately. This means following guidelines set out in a formal code of conduct or any applicable legislation.
Franchising models recap
Heavy-franchising models like mcdonald’s.
In a heavy-franchising model like McDonald’s, the initial fee, the investment to open up a restaurant, and the net worth required to operate the business is quite high.
To keep the standards high, McDonald’s has a dedicated arm that is in charge of land development and controls the rental agreement with the franchisees.
The franchisees, in turn, own the business and they will pay royalties to the company.
In a heavy-chained model, like Chick-fil-A
The initial fee to open up a restaurant, the net worth required to operate, and the overall investment required are much smaller.
Indeed, the company owns the whole operation, and it accepts applications from thousands of potential franchisees each year.
In this franchising model, therefore, the growth of opening new restaurants is much slower compared to the heavy-franchised model.
However, the company makes much more money from the franchising operations, as it gets high royalties as a percentage of sales, and it also splits profits with franchisees.
De facto, in this model, the franchisee is more like a high-profile manager than the business owner.
And in part, this is justified by the fact that Chick-fil-A bears the costs of opening these restaurants.
In a hybrid model
Or what we define franchained, a company can leverage a chain model in the short term and unleash the franchising model, once the operations have been established.
The Coca-Cola Company leverages this model to establish new operations.
An opposite scenario might be that of using the franchising model in the short term to test whether new markets are profitable by reducing the operational costs required to open new units and by speeding up the growth while internalizing them in the long run, if they turn out to be successful and strategic for the company.
What are the 3 types of franchises?
The three main types of franchising comprise:
According to the FourWeekMBA’s research, three other types of franchising models were identified:
What are the risks of franchising?
One of the major risks of a franchising strategy is the loss of standards, especially related to product quality. For instance, McDonald’s has figured out how to keep standards higher for its franchisees by controlling the land, thus making sure that the franchisee is aligned with the product’s standards.
What makes a good franchise model?
A good franchise model combines amplified distribution and growth by outsourcing expansion to franchisees while making sure these franchisees follow the core standards that the franchisor sets. Not everyone can run a franchising business model at scale. One of the companies that managed to run such a model is McDonald’s .
Connected Case Studies
McDonald’s Business Model
Starbucks Business Model
IKEA Business Model
Connected Business Model Types And Frameworks
What’s A Business Model
Business Model Innovation
Level of Digitalization
Digital Business Model
Tech Business Model
Platform Business Model
AI Business Model
Blockchain Business Model
Asymmetric Business Models
Attention Merchant Business Model
Open-Core Business Model
Cloud Business Models
Open Source Business Model
Freemium Business Model
Freeterprise Business Model
Marketplace Business Models
B2B vs B2C Business Model
B2B2C Business Model
D2C Business Model
C2C Business Model
Retail Business Model
Wholesale Business Model
Crowdsourcing Business Model
Franchising Business Model
Brokerage Business Model
Dropshipping Business Model
Main Free Guides:
- Business Models
- Business Strategy
- Business Development
- Digital Business Models
- Distribution Channels
- Marketing Strategy
- Platform Business Models
- Revenue Models
- Tech Business Models
- Blockchain Business Models Framework
About The Author
- Bundle Promo
- 70+ Business Models
- Airbnb Business Model
- Amazon Business Model
- Apple Business Model
- Google Business Model
- Facebook [Meta] Business Model
- Microsoft Business Model
- Netflix Business Model
- Uber Business Model
- Request Info
- Give to Tulane SoPA
- Information For...
- Career Advising Appointments
- Career Development Events
- Faculty & Staff
- Advisors, Faculty, & Staff
- Advisory Boards
- Campus Locations
- Industry & Academic Partnerships
- SoPA Honors
- Students & Alumni
- Support Our Mission
- Work at SoPA
- Accelerated Master's Programs
- Bachelor's Degrees
- Degree Requirements
- Master's Degrees
- Programs of Study
- All Degrees & Certificates
- Graduate Degrees & Certificates
- Undergraduate Degrees & Certificates
- Admissions Process
- Credit for Life & Work
- Financial Assistance
- Important Deadlines
- Non-degree Seeking Graduate
- Transfer Student Information
- Tuition & Fees
- Academic Calendars
- Tulane University Student Resources
- Military Students
- New Student Orientation Guide
- Online Learning Student Guide
- Register for Classes
- SoPA Catalog
- Student Support and Success Newsletter
- Career Planning
- Industry Focused Career Resources
- Degrees & Programs
- Explore SoPA
- Student Info
- Career Development
The Franchise Business Model: Everything You Need to Know
You may be wondering what to make of franchising and whether it's something you should pursue. But if you don't have a solid indication of what franchising is, even the basic concept can be overwhelming. Here's a guide to everything you need to know about franchising.
What Is Franchising?
Franchising, or a business franchise model, is a contractual business model or relationship whereby an established brand, known as the 'franchisor,' allows an independent business owner, or franchisee, to use its branding, business model, and other intellectual property. In return, the franchisee agrees to pay an upfront franchise fee, plus ongoing royalties to the franchisor.
There are dozens of different types of franchise arrangements, but three of them are the most common. They include:
- Business format franchise : This is the most common type of franchise arrangement. In this model, the franchisor allows a third party to do business using their trademarks and business model in exchange for fees and a recurring percentage of sales revenue. Franchisees under this model are run according to the parent company's guidelines and rules.
- Product franchise : This is the oldest form of a franchise arrangement. Under this model, the franchisees exclusively distribute or sell franchisor's products.
- Manufacturing franchise : Within this model, third-party manufacturers obtain exclusive rights to produce and distribute products using the franchisor's trade name and trademark.
Advantages of Franchising For Entrepreneurs
Ongoing support from the franchisor is not the only benefit of franchising. Here are a few benefits associated with franchise businesses:
- You'll work with an already established brand name: A strong brand will inspire customer loyalty, lead to more sales opportunities, and lend a competitive edge to your business.
- Reduced risk: If you work with a top franchisor, the risk of your business failing is very low compared to starting a business of your own.
- Simplified procurement processes: Another added advantage of franchising is you'll get access to quality suppliers and better deals.
- You don't have to worry about advertising or marketing: Your business will benefit from ad campaigns and promotions managed by the franchisor. The franchisor will also conduct market research on the best potential locations and share the findings with you.
- Quality leadership and lower operating costs: The franchisor will train you and help you identify the best strategies to manage your business operations effectively while keeping your costs low.
What Does the Franchisor Get Out of This Arrangement?
On the opposite end, there are a variety of incentives for businesses to adopt the franchise model. Here are some benefits of franchising for the franchisor:
- New locations and desirable market: Franchising is a source of capitalized expansion to new and desirable locations. Rather than franchisors putting their own money into market research, franchisees invest their funds to establish a business in a desirable location.
- Additional revenue: Franchisors benefit from ongoing royalties.
- Additional advertising: Franchisors also benefit from expanded advertising power through franchisees.
How Does the Franchising Process Work?
The franchising process varies depending on the type of franchise arrangement, state, and franchisor guidelines. That said, a typical franchising process will look something like this:
Step 1: Gather background information
First things first, conduct research to identify the type of franchise you would like to venture into. Make sure you have a clear idea of what you expect to gain from starting a franchise. Next, come up with a list of franchisors you'd be interested in investing in. Prioritize selecting businesses that match your goals, budget, and business acumen. Also, make sure you research the legal considerations involved with a particular industry or jurisdiction for starting a franchise in your state.
Step 2: Reach out to the franchisor
Contact the franchisor's representative and schedule a meeting. A face-to-face meeting is an opportunity for you to know more about the business and help you make an informed decision. Key questions to consider include inquiring about how long the business has been in operation, its growth plan, and risk factors. After the interview, the franchisor should offer you their franchising brochures, guidelines, and other relevant initial documentation for potential franchisees.
Step 3: Negotiations
Assuming initial conversations go well and the franchisor meets your key criteria, it's time to negotiate the terms of the partnership. This stage is often quite complicated, so you need to equip yourself with the best negotiation skills and strategies. Tulane SoPA can help sharpen your negotiation skills and understand business fundamentals via our Applied Business Studies program .
Step 4: Agreement Signing
Once the terms on the table are accepted, the next step forward is signing a formal agreement. At this stage, consider hiring a legal expert to guide you. Also, take some time to review the agreement to ensure that it's as clear and detailed as possible to avoid confusion and potential disputes down the road.
The franchise disclosure document, or FDD, forms the legal foundation to sell a franchise. It is a fundamental requirement for both the federal and state franchising laws. The FDD requires a franchisor to provide all franchise disclosure documents with their respective state regulators. Also, under the FDD, franchisors can renew their agreement with their franchisees at the end of an agreement in accordance with (Sec. 8) Small Business Franchise Act.
Prepare to Become a Leader in the Business Sector with Tulane SoPA
To run a successful franchise, you'll need to equip yourself with the right business management skills that will mold you into an effective entrepreneur. Tulane School of Professional Advancement's Applied Business Studies courses can help you start your journey to building your future as a business owner. Request more information about our program today to learn how we can help you pave the way to a new career with our flexible online degree programs.
Request more information about Tulane SoPA's programs and admissions process
By submitting this form, you agree to receive information about the Tulane School of Professional Advancement’s programs via email, phone and/or text. You may opt out at any time.
The Franchise Business Model 101 – Introduction and How Does It Work
The franchise business model is not new. In fact, franchising is an ancient distribution model that dates back to the middle ages and ancient China. “In the middle ages, the local titled landowner would grant rights to the peasants or serfs, probably for a consideration, to hunt, hold markets or fairs or otherwise conduct business on his domain. With the rights came rules and these rules became part of European Common Law, explained FranChoice .
Modern-day franchising is believed to have started with Benjamin Franklin, who in 1731 entered into the first franchise agreement with Thomas Whitmarsh to provide printing services in Charlestown, South Carolina. In the early 1850s, Isaac M. Singer again looked to the franchising model to distribute the Singer sewing machines. But, it would be another century after Singer before franchising would become truly popular, thanks to Ray Kroc and his discovery of the McDonalds hamburger stand.
Today, there are thousands of franchises across hundreds of industries and sectors. As of 2018, the franchise industry employed 21 million people and generated $2.3 trillion of economic activity, according to a U.S. government report.
Franchising has contributed greatly to the overall US economy and has proven to be a lucrative avenue for those who seek both freedom and financial stability. But what exactly is a franchise? Are there different types of franchise models? How does it all work? And is owning a franchise right for you?
What is a Franchise? Understanding the Franchise Business Model and How Does It Work
A franchise is a type of business that is operated by an individual(s) known as a franchisee using the trademark, branding and business model of a franchisor. In this business model, there is a legal and commercial relationship between the owner of the company (the franchisor) and the individual (the franchisee). In other words, the franchisee is licensed to use the franchisor’s trade name and operating systems.
In exchange for the rights to use the franchisor’s business model — to sell the product or service and be provided with training, support and operational instructions — the franchisee pays a franchisee fee (known as a royalty) to the franchisor. The franchisee must also sign a contract (franchise agreement) agreeing to operate in accordance with the terms specified in the contract.
A franchise essentially acts as an individual branch of the franchise company.
Should You Buy a Franchise or Start a Business From Scratch?
The Franchisor and Franchisee Relationship
The Franchisor is the parent company that sells the rights to franchise their brand to prospective franchisees. The franchisor is the one who has developed the company, brand and operating systems. Upon the decision to franchise their business, the franchisor offers franchisees the rights to their proven business model, recognizable trademark, established business systems, and their training and support.
The Franchisee is the individual who buys the rights to sell the products or services and utilize the proven and established business systems mentioned above. Although the franchisee is, in essence, buying a pre-established business, franchisees must work hard in order to gain loyalty in their market, attract talent and grow their franchise business. After all, it is the franchisee that runs the day to day business.
The franchisor/franchisee relationship should be one built upon mutual respect, understanding, and support. Of course, as with all relationships, no two are the same. Although relationships between franchisee and franchisor will differ from brand to brand, one thing always remains the same: the franchisee/franchisor relationship matters.
What Franchisees Can Expect from Their Franchisor
When a franchisee is serious about a franchise opportunity, the franchisor will share their Franchise Disclosure Document (FDD) , which holds imperative information about bankruptcies, various fees, franchisee obligations, and more.
For interested and serious buyers, some franchisors offer financing programs that can assist franchisees in finding a loan servicer or alternative methods of payment.
If the franchise requires a physical location, usually, the franchisor will assist in site selection as well as finding a local contractor to construct the approved architecture.
Training and Operational Guidance
Franchisors also provide franchisees with an operating manual and in-person or online training to understand how the business runs. The operating manual includes all of the roles of employees, performance standards, management operations, and other specifications. The training tends to take place either at the franchisor’s corporate headquarters or a combination of online training and in-person training.
Marketing and Advertising
Franchisors also supply their franchisees with marketing and advertising. This could be through television and radio ads or through social media and email campaigns. Franchisees are usually charged a marketing fee to cover this cost. Some franchisors also lend administrative services for their franchisees, like human resources and accounting services.
As a franchisee gets their business up and running there are bound to be questions and concerns that arise. The franchisor will provide varying levels of support throughout the life of the franchise agreement. Not to mention, franchisee also have access to an entire network of fellow franchisees, who may be able to offer advice or offer you a solution to a common problem.
The Pros and Cons of Franchising: Is it Right for You?
Types of Franchising – Two Primary Franchise Business Models
There are two primary franchise business models that exist today: The Product Distribution Franchise Model and The Business Format Franchise Model.
Product Distribution Franchise – In the product distribution franchise model the franchisor manufacturers the product and the franchisee sells the product. This relationship is similar to the supplier-dealer relationship with a few differences. One major difference is that in the franchise relationship the franchisee may distribute the products on an exclusive or semi-exclusive basis whereas a supplier-dealer relationship may allow the dealer to sell several different brands at once. Examples of product distribution franchises include Coca-Cola, John Deere, and Ford Motor Company.
Business Format Franchise – The Business Format Franchise is the most common franchise model. In this model, the franchise is allowed to use the brand and trade name of the franchisor, like in the product distribution model, but they are also granted access to the product distribution model. Most of the franchises that immediately comet o mind, like Wendy’s, Dunkin Donuts, or McDonald’s are business format franchises.
Different Types of Franchise Ownership
Single Unit Franchisee – When a franchisee purchases their first franchise they are considered a single-unit franchisee. This is the most common form of franchise ownership.
Multi-Unit Franchisee – If a franchisee finds success with their first franchise venture they may choose to open up a second, third or even fourth franchise from the same franchisor. When a franchisee owns more than one franchise unit they are considered to be a multi-unit owner.
Multi-Unit Area Developers – Multi-unit area developers are similar to multi-unit franchisees except that they agree, up front, to develop a certain number of franchise locations within a specified time period and area. This approach is best for franchisees who are looking for market exclusivity and have the resources to secure that exclusivity with the franchisor.
Master Franchisee – A master franchisee is very similar to a multi-unit area developer in that they are obligated to open a certain number of locations in a specified time period and area. The difference is that the master franchisee is also able, and sometimes obligated, to sell franchises to other prospective franchisees. The master franchisee then acts as a middleman for the franchisee and the franchise company.
Licensing vs. Franchising
One common area of confusion for prospective franchisees is understanding the difference between franchising and licensing.
Licensing is a broad term that businesses use for contracting purposes. Licensing gives the licensee a right to operate in cooperation with a brand, gaining access to the brand’s intellectual property, brand, design, and business programs. In exchange, the licensee pays royalty fees to the licensor. The licensor may have a say in how the intellectual property is used but not how the licensee operates their business. A licensor will grant a licensee the right to use their intellectual property but the licensor will not provide support or training or exert any control over how the licensee uses that intellectual property.
A franchise, on the other hand, is a legal and commercial relationship between the owner of a company (the franchisor) and an individual (the franchisee) who is starting a branch of that business using the business’ trademark logos and business model. Essentially, a franchise is an independent branch of the franchise company. The franchisee sells the product or service that the franchisor supplies.
What’s the Difference Between Licensing and Franchising? Learn More!
Franchise Opportunity vs. Business Opportunity
Another common area of confusion is franchise opportunity versus business opportunity. While at first glance they may sound very similar, there are some major differences. For instance, a franchise opportunity includes the licensing of trademark rights, offers robust training and operational assistance throughout the life of the contract, and can often cost more than a business opportunity due to the ongoing required fees.
While all business opportunities are different and can be hard to define, the main difference is that typically when someone pursues a business opportunity they are unlikely to receive the same level of support, training or guidance that a franchisee receives from their franchisor.
43 Common Franchise Terms You Need to Know!
Not All Franchises are Created Equal
There are thousands of franchise opportunities for eager entrepreneurs who see the appeal in the franchising model. However, not all franchises are smart investments. That’s why it’s important for prospective franchisees to research the opportunities they are interested in.
To help prospective buyers find the best opportunities, each year, Franchise Business Review surveys thousands of franchisees across hundreds of brands. Based on this research we are able to determine the best franchise opportunities on the market today based 100% on franchisee satisfaction. Details on this year’s top-rated franchise brands can be found on our Top 200 list.
Explore More Articles
- Top Franchises
Right at Home
Right at Home franchise serves its clients and community by providing in-home companionship, personal care services, and assistance to seniors and disabled adults who want to continue to live independ…
Snap-on is a leading global developer, manufacturer and marketer of high-end tool and equipment solutions for professional tool users.
360clean is a health-focused office cleaning service for businesses throughout the United States.
FBR Franchise Academy
Should I Use an Unsecured Business Loan to Finance My Franchise Business?
Buying a franchise & need a limited amount of cash to reach your goal? Consider an unsecured business loan to finance your franchise.
Should I Use a 401K Rollover to Finance My Business?
401K Rollovers, also known as Rollovers for Business Start-ups (ROBS), is a method of financing that allows you to use your retirement funds to finance your business.
Is an SBA Loan a Good Option for Franchise Financing?
The Benefits of Owning a Neighborly Ⓡ Service-Based Franchise
Brad Stevenson, Neighborly’s chief development officer, said, “Joining a franchise network like Neighborly provides entrepreneurs with the tools and resources they need to launch and grow their business effectively and successfully. Having the support of a network like Neighborly can help make your dreams of owning a business a reality."
Franchisee Insights: An Interview with 360clean Franchisee, Lorenzo Bates
Recently, Michelle Rowan, president and COO of Franchise Business Review, had a chance to speak with Lorenzo about his journey to franchise ownership and how his business is performing today. Watch the video to learn more about Lorenzo’s story.
Senior Care Authority Franchise Offers a Multitude of Benefits to Help Owners, Clients, and their Families
The high demand for senior services allows Senior Care Authority franchise owners to build a financially and personally fulfilling business.
Right at Home Senior Care Franchise Recognizes Franchisees and Employees Through Robust Awards Program
Right at Home senior care franchise has received myriad awards itself, and this franchisor believes in paying it forward. Their robust awards program incentivizes, recognizes, and rewards franchisees and employees who go above and beyond.
Right at Home Multi-Unit Franchisee Beau Green Shares Insights on Operating His Businesses
Beau Green is a Right at Home multi-unit franchise owner and former athlete who leverages his coaching skills in developing teams to establish and grow each of his six franchise locations.
Should I Use a Crowdfunding Platform for My Business Startup?
Is crowdfunding right for your small business? Learn more about equity vs. reward-based crowdfunding platforms and discover the best crowdfunding option for you.
Franchisee Satisfaction a Key Consideration Among Potential Franchise Buyers
Franchisee satisfaction is a key driver for franchise buyers. Franchise owners are the ones with their ‘boots on the ground’ and their hands in the weeds of the day-to-day operations. They’ve hired staff and served clients. They’ve faced and overcome challenges. They are the true authorities on what it’s like to run the business.
FirstLight Home Care Shines a Light on Caregivers, Provides Bright Futures for Franchise Owners
Brian Roh spends about 55 hours each week caring for two clients as a caregiver for FirstLight Home Care in Charlotte, North Carolina, a franchise owned by Mary Ellen and Ken Fleming. Roh, a retired flight attendant, was recently named Caregiver of the Year by FirstLight corporate office.
Franchisees Dustin and Rebecca Rauch on Operating a Caring Senior Service Franchise
“We were looking for a brand with a proven track record. One with many years in business; a smaller franchise system where we wouldn't be lost in the mix—as just another number; a brand that would be supportive; one we could work with as a team to the benefit of both parties; an opportunity with a low failure rate; and most importantly and brand that exhibits a desire for excellence in every way, starting at the top, and expects the same from their franchisees.”
Is Innovation the Secret Ingredient to East Coast Wings + Grill Franchise Growth?
Consumer dining tastes and trends are continually shifting. Not only must a restaurant franchise keep its finger on the pulse of the economy and the competition to ensure a healthy bottom line, but it also must be able to understand and respond to customers' changing needs and preferences.
Cruise Planners Travel Franchise Is Growing to Meet 2023 Travel Demand
Americans are ready for adventure! Travel is back, and travelers are seeking assistance from experienced travel agents. You don’t need to be a seasoned traveler to embark on a new career with Cruise Planners, but you do need to have a passion for travel and for helping others.
Should I Buy a Starbucks Franchise?
Thinking of buying a Starbucks franchise? In this article, we explore whether it's possible to buy a Starbucks franchise and other coffee house franchise alternatives available to you.
Is a Food Franchise Right for You?
Thinking of buying a food franchise? Part of your due diligence in exploring food franchises should include understanding the various types available, researching which have the highest franchisee satisfaction ratings, and identifying which brand resonates with your own priorities, values, and goals.
Franchising As a Business Model
- Small Business
- Business Models & Organizational Structure
- Business Models
- ')" data-event="social share" data-info="Pinterest" aria-label="Share on Pinterest">
- ')" data-event="social share" data-info="Reddit" aria-label="Share on Reddit">
- ')" data-event="social share" data-info="Flipboard" aria-label="Share on Flipboard">
Process of Franchising
Description of franchises, the advantages of a franchise agreement.
- How to Start a Carpet Cleaning Business
- How to Buy a Smoothie King Franchise
Franchise organizations are big business. McDonald's, KFC, 7-11 and Century 21 are among the United States' successful franchise business examples, Franchise Direct says. If you sign up with a franchise, you get a ready-made business model with most of the kinks already worked out. But, as with any business opportunity, franchise models have pros and cons you'll need to weigh.
When you buy into a franchise, you get a ready-made business model. That eliminates a lot of the market research and planning that entrepreneurship normally requires. However, the cost of investing in a franchise organization can easily top $1 million .
Franchise models, Entrepreneur says, allow a startup entrepreneur to own a ready-made business. You pay an initial fee and ongoing royalties to one of the franchise organizations. In return, you gain the right to sell the company's products and services and to use their brand. You also get ongoing support from the franchisor.
The advantages of this system are shown by some of the successful franchise business examples. Burger King, Pizza Hut, Dunkin' and Taco Bell are brands recognizable anywhere in America. Buy into them or other franchises such as RE/MAX or Marriott, and your business has a reputation from the moment it opens.
While there's always a risk with opening a new business, franchise organizations reduce that risk. It's not just that they're known quantities with established brand appeal. It's that if they're willing to open a branch – or a second, third or fourth – in your community, they've done the research and they're confident it can succeed. Even so, Forbes says, success isn't guaranteed. Like any business opportunity, i's important to assess the odds carefully.
Franchise Models: Pros and Cons
One advantage of buying into franchise organizations is that there's no startup stage. You don't need a business plan, market research and testing to see if your product line is viable. Domino's, for instance, knows that their pizza and processes are viable. All you have to do is adopt the model and make it work for you. If you advertise your new Wendy's or 7-11, the name recognition is there. Nobody wonders what you want to sell them.
As a franchisee, you're part of a national organization with deep pockets. When McDonald's advertises in prime time, that benefits you. Franchises can buy food, equipment and other items in bulk with a corresponding discount on the cost. If you order 10,000 gallons of soft drinks from HQ, you'll save money compared to the open market.
Being part of a national organization has drawbacks too. Franchise organizations expect all franchisees to abide by the rules the company lays down. With your own business, you can innovate or shake things up at will; with a franchise, you need approval from the parent organization. You'll have to honor all the terms in your franchise contract or lose your opportunity.
Startup money can be a huge disadvantage. The upfront fees for becoming a franchisor range from tens of thousands to over $1 million , plus royalties and other expenses. There are many businesses you can start for considerably less. It may be easier to find financing for a franchise than for a new startup, but it's still a huge investment.
- Franchise Direct: Top 100 Franchises 2021
- Entrepreneur: Franchising
- Forbes: The Pros and Cons of Buying a Franchise
Fraser Sherman has written about every aspect of business: how to start one, how to keep one in the black, the best business structure, the details of financial statements. He's also run a couple of small businesses of his own. He lives in Durham NC with his awesome wife and two wonderful dogs.
The advantages of owning your own business vs. franchises, what are the benefits of a franchise, differences between licensing & franchising agreements, how to become a franchise owner, what does franchising mean, franchise weaknesses & strengths, summary of what a franchise is, a franchise marketing strategy, how does somebody start a krispy creme franchise, most popular.
- 1 The Advantages of Owning Your Own Business vs. Franchises
- 2 What Are the Benefits of a Franchise?
- 3 Differences Between Licensing & Franchising Agreements
- 4 How to Become a Franchise Owner
Franchise Business Model and How It Works
As an entrepreneur, you can confirm that starting a business from scratch is not a walk in the park. The journey comes with a lot of hurdles and challenges. First, you need to build and establish your brand. Next, you must put operational systems in place. Also, developing your products and services and introducing them to the market is another challenge.
What is Franchise Business Model?
How does franchise business model work.
The franchisee is the next party in this model. Franchisees are entrepreneurs that want to own businesses but lack enough capital to start from scratch. For this reason, they approach an established brand for a partnership. This relationship allows them to sell the brand’s products and services following all the quality, design, business strategies, and operational systems. The franchisee pays an initial fee and follows the required rules for engaging in a relationship with these brands.
Examples of Franchise Model Businesses
MacDonald’s is a good example of a franchise business. This reputable fast-food company partners with entrepreneurs seeking to run MacDonald stores in given cities or towns. The entrepreneur needs to have the required investment and ready to undergo a nine-month training. The training involves learning how MacDonald’s operate, their business strategies, production rules, and quality standards.
Pros and Cons of the Franchise Business Model
Support from the franchisor.
No doubt, start a business from zero is tricky. You face many challenges particularly when you do not have any prior experience. The franchise model saves you from all these troubles. When you join the franchise partnership, your franchisor provides ongoing support to help you get your feet on the road.
High business success rate
Many new businesses fail within the first six months to three years. The challenges of building their brand are the major reason why they do not succeed. When it comes to franchises, there is a high success rate. The new business uses an already established brand name.
Low marketing cost
As noted, franchisees run their ventures under established brand names. You provide products and services that the users have knowledge about. Also, the franchisors allow you to use their systems and business strategies to reach out to the customers.
No brand control.
Independence is critical for every entrepreneur. You want to control your brand and have a say in whatever happens to it. In the franchise business, your success relies on the brand reputation. If the brand suffers a bad reputation, it will affect your sales.
Also, you face limitations on the products or services you can offer. You cannot add items that your franchisor does not offer or introduce them on your menu without the approval of the franchisor.
With a franchise business model, you do not need to struggle with all these issues. You work as a branch of an established brand. So, your chances of success are high. However, you have zero control of the brand, and sharing of profit in form of loyalty fees is a norm.
Business model canvas: a great tools for an innovative business model design, walmart business model and how it makes money, dropshipping business model and how it works.
10 Most Common Types of Business Models
What is a Business Model?
A business model is the company’s overall plan of operation within your market. If you’re unsure where to start, tools such as the Business Model Canvas walk you through decisions by segmenting the model into key parts of the operations—where the company conducts business, revenue sources and cost structure, partners or third-party vendors, customer base(s), how the product or service reaches the end user, how much interaction your company has with the customer, and more.
Types of Business Models
Because there are several business model types, it is common for companies to have a combination of different models in order to acclimate to changing consumer patterns. Here are the most commonly-used business model strategies:
Examples: Hilti, Coca-Cola, General Motors
Simply put, manufacturing companies create products with raw materials or pre-made parts and components. Manufacturing companies focus solely on finished goods that are then sold to either consumers or other companies who utilize the finished goods. This model is common with large-scale production companies.
Examples: Airgas, Anheuser-Busch, Morris & Dickson
Products are created and sold by retail outlets—but what happens in between? Distribution companies often work as intermediaries to connect the manufactured product to retailers, or even directly to consumers. Supply chain and logistics are heavily used in distribution companies, as there are copious channels that products are entered into. The end goal for distributors is that the products are sent to the correct end user.
Examples: Massage Envy, Subway, Hyatt Place
Franchise ownership is the licensed privilege of a franchisee to conduct business with an already established and trademarked company. Franchises provide franchisees benefits such as trademark usage, marketing material, training, and other management resources. However, majority of franchises require anywhere from $50,000-$200,000 to start, as well as ongoing royalties to the franchisor, 4%-8% of gross revenue.
4. Brick-and-Mortar/Traditional Retail
Examples: PetSmart, Barnes & Noble, Mattress Firm
Retail is the sale of products to consumers, and goods are used primarily for consumption, not resale. Brick and mortar, or a physical building where a person can purchase goods, is the traditional and most conventional retail strategy. The future of brick-and-mortar businesses is highly debated due to the rise of E-Commerce.
5. E-Commerce/Online Retail
Examples: Amazon, eBay, Chewy
E-commerce, also known as internet commerce or electronic commerce, is the commercial transaction of money for goods and services through the internet. In 2017, consumers spent a total of $453.46 billion for retail purchases made on the web. Some purchases cannot be made on the web, like alcohol, gas, certain animals, and certain types of food—however, U.S. e-commerce grew by 16% in 2017, and numerous business owners either started an online business or modified their already existing businesses as a result of this growing trend.
Examples: Wal-Mart, Target, Best Buy
Also known as “click-and-brick” and “click-and-mortar,” the brick-and-click model was created to fill the holes in the e-commerce (click) and retail (brick) models. This model is more accessible for consumers because they have the option to instantly purchase a product online; if they need to make a return, customers can travel to the nearest physical store at their convenience. With the brick-and-click model, the long-standing and larger-brand businesses have access to wider financial resources, which also assists in acquiring new customers.
Note : Although this model is meant to transform shopping into a more convenient experience, businesses face the challenges of both a brick-and-mortar retailer and an e-commerce business. Competitive pricing against manufacturers, logistics to distribute goods and manage inventory, and combining overhead expenses of both types of businesses are just a few conflicts that brick-and-click owners face.
Examples: Spotify, MailChimp, Hootsuite
Have you ever used a free media streaming service with commercials, and the music or video stopped to offer you a commercial-free experience for a monthly fee? This is a “freemium” business— a combination of “free” and “premium”—a strategy that offers free versions of a product or service, but more advanced features at premium prices.
Examples: Netflix, Birchbox, Dollar Shave Club
In a subscription business, the company relies on recurring revenue on a consistent schedule (weekly, monthly, annually). Subscription businesses require close attention to churn (the rate of unsubscribes), acquisition of new customers, and increasing the value of existing customers.
Examples: Supercuts, Law Firms, PR Firms
This model is where the idea of “having regulars” comes from—a high-touch business relies on the relationship and trust between a customer and the business. In a high-touch company, customers are more likely to interact with the same salesperson or consultant in the company. These types of businesses also charge a higher amount for specialized services due to the quality determined by the customer.
Examples: IKEA, Swirll Yogurt
Also known as the “touchless conversion sales model,” the low-touch model requires little-to-no customer interaction with employees. Consumers are able to enter the business, receive the goods they need, and check out. In contrast to the high-touch model, prices tend to be lower as a result of smaller staff, less personalization of service, strong self-branding, and higher demand caused by social media. Logistics and product placement are also commonly designed for easy, grab-and-go access.
Having multiple business models is common, especially for companies who realize the need to engage in a more profitable revenue stream. Amazon, originally an e-commerce platform for books, now practices e-commerce, subscription, and freemium due to its marketplace expansion to media streaming and various items. Wal-Mart also adapted, offering brick-and-click services with the curbside pickup/return. Some items from Wal-Mart are solely e-commerce, not even allowing for in-store pick-up.
In today's constantly-changing environment, adaptability is crucial to keep up with emerging trends. Having a vision, purpose, and business plan, however, will help ensure that today's fad does not cause you to lose course of your true business goals, and more importantly, your business’s success.
Frequently Asked Questions
Looking for answers? You came to the right place. To learn more about our company mission and culture, click the link below.
Swyft Filings charges only $49 + state filing fees to incorporate your business. Filing fees vary from state to state. If you have a question about a specific state, feel free to email or contact us at 877-777-0450.
No. For business filings, you paid the total price for your order at the time you placed it.
However, if you signed up for the Swyft Filings Registered Agent Service, you will be charged for this service when the state grants your company a Certificate of Formation. This recurring fee will be automatically charged to your account for each period the service is active unless you change your Registered Agent with the State or dissolve your company.
Orders are processed as they are received. However, clients that select Express Processing or Same Day Processing will have their orders processed before Standard Processing orders.
Incorporation times vary from state to state. Feel free to contact us by email or at 877-777-0450 for information on specific state processing times.
Everything you need to know about starting your business.
Each and every one of our customers is assigned a personal Business Specialist. You have their direct phone number and email. Have questions? Just call your personal Business Specialist. No need to wait in a pool of phone calls.
Tailor Brands vs. LegalZoom: Comparing LLC Formation Services
LegalShield vs. LegalZoom: Comparing LLC Formation Services
Should Artists Start an LLC?
5 LegalZoom Alternatives for Entrepreneurs
Quoi Business Duo Focuses on Accessible Sustainable Healing & Community Outreach
The Responsibilities of a Registered Agent
Do what you love. we'll handle the paperwork..
Trusted by over 250,000 businesses since 2015. Start your business with confidence. Affordable. Fast. Simple.
One Page Pitch
Franchise Lean Business Model Canvas
This slide shows the lean business model canvas to help entrepreneurs in easily tracking the current business processes and performance. It includes details related to key partners, activities, resources, value proposition, customer relationship, channels, customer segments, cost structure and revenue streams.
These PPT Slides are compatible with Google Slides
Compatible With Google Slides
- Google Slides is a new FREE Presentation software from Google.
- All our content is 100% compatible with Google Slides.
- Just download our designs, and upload them to Google Slides and they will work automatically.
- Amaze your audience with SlideTeam and Google Slides.
Want Changes to This PPT Slide? Check out our Presentation Design Services
Get Presentation Slides in WideScreen
Get This In WideScreen
- WideScreen Aspect ratio is becoming a very popular format. When you download this product, the downloaded ZIP will contain this product in both standard and widescreen format.
- Some older products that we have may only be in standard format, but they can easily be converted to widescreen.
- To do this, please open the SlideTeam product in Powerpoint, and go to
- Design ( On the top bar) -> Page Setup -> and select "On-screen Show (16:9)” in the drop down for "Slides Sized for".
- The slide or theme will change to widescreen, and all graphics will adjust automatically. You can similarly convert our content to any other desired screen aspect ratio.
- Add a user to your subscription for free
PowerPoint presentation slides
This slide shows the lean business model canvas to help entrepreneurs in easily tracking the current business processes and performance. It includes details related to key partners, activities, resources, value proposition, customer relationship, channels, customer segments, cost structure and revenue streams. Introducing our Franchise Lean Business Model Canvas set of slides. The topics discussed in these slides are Key Resources, Customer Relationship, Channels. This is an immediately available PowerPoint presentation that can be conveniently customized. Download it and convince your audience.
Please let us know your primary area of interest so that we can recommend the right products to you
Do you want to remove this product from your favourites?
People who downloaded this PowerPoint presentation also viewed the following :
- Diagrams , Business , Strategy , Icons , Business Slides , Flat Designs , Strategic Planning Analysis , Strategic Planning
- Key Resources ,
- Customer Relationship ,
Franchise Lean Business Model Canvas with all 6 slides:
Use our Franchise Lean Business Model Canvas to effectively help you save your valuable time. They are readymade to fit into any presentation structure.
Ratings and Reviews
by Cliff Jimenez
January 30, 2023
by Cleo Long
January 29, 2023
BE ONE OF THE FIRST TO DOWNLOAD THE FIRST BUSINESS MODEL CANVAS E-BOOK FOR FRANCHISES
Download your free e-book
First Business Model Canvas for Franchisors ebook
Thank you for downloading your free ebook The Business Model Canvas for Franchisors .
- Business Model
- Business analysis
- Strategic planning
- Coaching and mentoring
- Business advice and support
- Business model generation
- Speaking and workshops
- Team building
- Sales and marketing
- Franchise development
- Franchise marketing
A pricing model is a method used by a company to determine the prices for its products or services. A company must consider factors such as the positioning of its products and services as well as production costs when setting the prices of ...
A new model for business presentations that allows for the broader emergence of ideas from the shared experience between audience and the presenter, that doesn't rely on the Authority of Office or comprehensive category expertise. How to le...
Franchise, business - Looking Good - Entrepreneur.com Signing out of account, Standby... A Canadian cosmetics franchise expands to the United States. A good face can charm a photographer, win a card game . . . or capture the attention of th...
The franchise business model is usually the business model chosen by those who want to start a new business, but do not have much idea how
Franchising is a business model where the owner (franchisor) of a product, service, or method utilizes the distribution services of an
Franchising, or a business franchise model, is a contractual business model or relationship whereby an established brand, known as the 'franchisor,' allows
Examples of product distribution franchises include Coca-Cola, John Deere, and Ford Motor Company. Business Format Franchise – The Business
7 Components of the Franchise Business Model Canvas · Threat of Entry · Supplier
Franchise organizations are big business. McDonald's, KFC, 7-11 and Century 21 are among the United States' successful franchise business examples
The franchise model is not a complicated aspect. This model involves two major parties which are the franchisor and the franchisee. Franchisors are corporate
Types of Business Models · 1. Manufacturing · 2. Distribution · 3. Franchise · 4. Brick-and-Mortar/Traditional Retail · 5. E-Commerce/Online Retail.
This slide shows the main reasons behind the sale of companys franchise such as to determine operating efficiency, to define critical franchising success
Download Franchise Lean Business Model Canvas PowerPoint templates and google slides, you can easily edit and design your presentation as
Franchises are different from other businesses in that they have an extra level. So we at No Ordinary Franchises have developed a Business Model Canvas