Franchising has always been there in the market, but it is only during the last few decades that it has become so popular. Today, people are starting a franchise not as a last resort, but as a career choice. When a system works so well, it’s quite natural to question how it works. So, here is a rundown on how franchising works.
• At first, a company, after failing initially and learning from its mistakes, finds success with a given product/service. There must be something unique about the product/service that can make it special among its customers/clients.
• The franchisor then perfects the system by running a second unit or by opening a model unit.
• After enjoying success with the second one and establishing brand awareness (at least in the local market), the company starts thinking about learning how to franchise the business.
• After learning the rules and regulations of the franchise industry, the franchisor prepares various documents such as FDD, franchise agreement and other related materials. Franchise fees and royalty fees are also fixed.
• A separate wing is established to oversee the franchise business for sale offers.
• The franchise businesses for sale offers are circulated in the market. The company may or may not introduce master franchise and area development offers.
• The first batch of people who apply to buy a franchise from the franchisor is screened. The people are selected according to their general business skills and experience. The net-worth of the candidates is also checked. Some franchise opportunities need specific professional training.
• The candidates are given the FDD, so that they can go through the franchise proposal of the company.
• Those who show further interest are called for the Discovery Day. The franchisor and the franchisee can meet for the first time during the course of Discovery Day.
• If the franchisee is interested in starting a franchise with it, the franchise agreement is given for review.
• Sometimes, a new franchisor may even allow some changes made by the franchisee.
• After the signing is over, the training begins. Other supports like real estate selection and leasing, remodeling the location, advertising in the market go on simultaneously.
• Grand opening announces the start of the franchise business.
• The franchisor periodically supervises whether the franchisee is following the rules. If the latter has any problem, it can call up the franchisor any time.
• The franchisee soon starts getting back his investment and another success story is born.
How Franchising Works - To learn more about this author, visit Ray Flores's Website.
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