business model canvas franchise

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:

When it comes instead to the franchisees, McDonald’s offers a proven playbook and process to create a money-making restaurant machine.

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:

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 .

More precisely:

https://author-prod-go-aem6-4.coke.com/assetdetails.html/content/dam/journey/us/en/testimages/sustainability-story-desktop-703x450.jpg

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.

Business objectives

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.

Key takeaways

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:

More Resources

Franchising vs. Licensing Business Model

About The Author

Gennaro Cuofano

Information for...

Search Tulane

Search form.

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:

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:

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:

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.

Franchise Regulations

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.

Organizational Management professionals at a computer - Tulane School of Professional Advancement

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.

Financing Options

For interested and serious buyers, some franchisors offer financing programs that can assist franchisees in finding a loan servicer or alternative methods of payment.

Location Assistance

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.

Categories (tags):

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 Tools

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

Process of Franchising

Description of franchises, the advantages of a franchise agreement.

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 Organizations

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.

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.

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.

Please enable JavaScript

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.

Profit sharing

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:

1. Manufacturing

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.

2. Distribution

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.

3. Franchise

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.

6. Brick-and-Click

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.

7. Freemium

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.

8. Subscription

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.

9. High-Touch

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.

10. Low-Touch

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

Men in suits sitting at desk looking at documents.

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.

Digital Transformation

Human Resources

Product Management

Artificial Intelligence

Franchise Lean Business Model Canvas

These PPT Slides are compatible with Google Slides

Compatible With 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.

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 :

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.

BE ONE OF THE FIRST TO DOWNLOAD THE FIRST BUSINESS MODEL CANVAS E-BOOK FOR FRANCHISES

No Ordinary Business Model Canvas 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 .

IMAGES

The Business Model Canvas
Business model canvas, Business canvas, Business design
The Business Model Canvas Distribution
Business Model Generation
What is a Business Model & Top Examples
File:Business Model Canvas.png

VIDEO

Business Model Canvas
Business Model Canvas
Business Model Canvas
Business Model Canvas
ENTR 6302 Business Model Canvas Pitch Presentation 3
Business Model Canvas

COMMENTS

What Is a Pricing Model?
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
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
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...
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
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
The Franchise Business Model: Everything You Need to Know
Franchising, or a business franchise model, is a contractual business model or relationship whereby an established brand, known as the 'franchisor,' allows
The Franchise Business Model 101
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
7 Components of the Franchise Business Model Canvas · Threat of Entry · Supplier
Franchising As a Business Model
Franchise organizations are big business. McDonald's, KFC, 7-11 and Century 21 are among the United States' successful franchise business examples
Franchise Business Model and How It Works
The franchise model is not a complicated aspect. This model involves two major parties which are the franchisor and the franchisee. Franchisors are corporate
10 Most Common Types of Business Models
Types of Business Models · 1. Manufacturing · 2. Distribution · 3. Franchise · 4. Brick-and-Mortar/Traditional Retail · 5. E-Commerce/Online Retail.
New business model canvas for the overall growth strategies run
This slide shows the main reasons behind the sale of companys franchise such as to determine operating efficiency, to define critical franchising success
Franchise Lean Business Model Canvas
Download Franchise Lean Business Model Canvas PowerPoint templates and google slides, you can easily edit and design your presentation as
Download the first Business Model Canvas for Franchises
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