Understanding
the Franchise Business Model



 

The franchise business model can be a very profitable one if you know what you’re doing. But just like anything else in business, you’ve got to know what you’re getting yourself into before you begin.

Here’s what to expect if you decide to buy into the franchise business.

 

What’s the Basis of the Franchise Business Model?



The way the franchise business works is simple. You basically pay a fee to use a model developed by another business. You gain the opportunity to not only learn how they do business but also to use their recognized name. You can forge a relationship with potential customers based on the name of the business you decide to buy into.

There are two major payments you make when buying a franchise business. First you’ll pay a royalty for using the company’s trademark, and second you’ll need to reimburse them for the training and advice they give to you when you’re in the startup phase. Some franchises combine these two main payments into one fee.

In most cases the franchise lasts for a certain amount of time with renewals throughout. Most agreements last between five and 30 years, and if you cancel early, then you’ll usually face big penalties.

 

Examples of Successful Franchise Business Models

 

Of course there are plenty of examples of successful business models everywhere you look. Papa Johns is a successful pizza franchise, and McDonald’s is a well-known fast food franchise. Just do plenty of research before you buy into any of these franchise business opportunities because in most cases the more recognizable the name is, the more expensive it will be to buy into it.

In addition to the brick and mortar business models most people know so well, there are also some home based franchises and online franchises that are perfect for people who want to start a small business.

If you’re looking for a cleaning franchise, Servpro and ServiceMaster Clean are two examples of home based franchises. If you’re looking for something a little more creative, Matco Tools and Snap-on Tools both involve delivering tools to customers who purchase them from you.

Some popular online franchises include WSI Internet or EA Sports / Madden Online franchise. There are also several travel franchises that allow you to sell trips through your own website. The good news about online franchises is the fact that their startup costs tend to be less expensive than those of a traditional brick and mortar franchise.





Other Considerations in the Franchise Business Model

 

If you think the franchise business is for you and you’re seriously considering buying a franchise, then you’ll need to have some cash on hand to get started. If you already have cash saved, then you know what your budget is and can begin looking for franchises you can start with that capital.

Keep in mind that not all franchises will allow you to start with a loan. Many of them require that you have your own cash in hand. You might be able to get some friends or family members to go into the business with you if you’re coming up a little short. 

Also do research on the franchise business model you’re considering investing in. Some are more profitable than others, and you also need a model that you think you can follow. Find out some of their secrets to success before you invest so that you know if it’s something you can do.

 

 


 

Return from Franchise Business Model to Starting a Business

Return to Business Ideas Oasis


 


New! Comments

Have your say about what you just read! Leave me a comment in the box below.