Franchise Business Model:
This is the
type of arrangement whereby the cost of establishing and
running individual business locations is shared by the
owner (franchisor) and an investor (franchisee).
They share in the cost and profits of the business but
the franchisee will have greater liability for his part
of the chain. The franchisee has a greater
incentive than a direct employee because he/she has a
direct stake in the business.
Franchisors usually provide financing, location, fully
stocked store, pay for expenses such as rent, real
estate tax, gas, water, sewer, electricity, assist with
payroll management, do the marketing, set prices, etc.
In return the franchisee pays a royalty fee to the
franchisor based on gross revenues or gross profits.
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Examples of the Franchise Business Model
Generate revenues by selling breakfast and lunch meals (items
including items such as egg sandwiches, sausage sandwiches,
hamburgers, fries, coffee, shakes, and other items). Prices
are set by the franchisor and a percentage of sales is paid to the
franchisor. Benefit from the large marketing budget and the
name recognition of the franchisor.
Generate revenues by selling a variety of products from a retail
location 24/7. Royalties are paid to the franchisor based on
gross profits and not on total revenues. Benefit from being
part of a well known brand that is known for quality, service,
cleanliness and value. The franchisor provides a fully
stocked, turnkey operation; pays for wate4r, sewer, gas and
electricity; building rent and real estate taxes; etc.
UPS Store Franchise: Generate revenues by getting
discounted rates on UPS shipping and then charge customers a
profitable retail rate. Get reimbursed from the franchisor for
those customers who print their own labels and drop off the package.
Provide additional services such as notary, mailbox rentals,
document service, etc.
Subway Franchise: Generate revenues by selling items
such as sandwiches, cookies, drinks, etc. Very little cooking
is requied on site. Benefit from being part of a larger
organization that can effectively market the business.