(Abstract) 100 Great Business philosophy: Concept 7: franchise

Concept 7 franchise

By selling brands, business plans, and specialized technologies to regional business owners, companies can increase their profits and generate global influence without having to take on increasing risks.

Concept

The number and scope of the franchise are large. It is a sales technique widely used from McDonald's fast food restaurant to Hyatt luxury hotel chains. Any franchise has two key elements: the licensor and the franchisee. The licensor sells its reputable brands and expertise to the franchisee, and then establishes a branch to manage the business. The benefit granted to a franchisee is that it can increase profits and become a trustworthy brand internationally (or globally.

Most people believe that the benefit of a franchisee is to reduce investment risks. At the same time, they also feel relaxed because as a franchisee, they do not need to develop new business plans or develop a brand that is not known to everyone.

Although franchise is an old concept, it was very active in the late 20th century and has a tendency to decentralize the management right structure. By 1999, statistics showed that there were 540,000 licensed dealers in the United States, and a new franchise store opened every 6.5 minutes during each business day.

Starbucks is a famous example of its success in exploiting the franchise. It was founded in 1971 and was a small store in the Seattle Park market. It adopts a franchise model. By 2006, it had 8000 franchise stores in more than 37 countries, with a profit of nearly $3 billion.

Practical application highlights

§ Ensures consistent services and products to all franchise stores, so as to establish a positive, stable and trustworthy reputation among customers.

§ Creating a new franchise store near an existing franchise store will take the risk of similar food and lose business opportunities. Although this is a positive business practice, it is very important to consider the consequences.

§ Grant franchisees a higher degree of independence and do not make them passive investors or business groups.

§ Ask experts, senior lawyers, or consultants to help you, whether you sell or buy a franchise. The key to success is to have appropriate commercial products or services, understand each of their details, and reach an agreement with others to work together.

(Abstract) 100 Great Business philosophy: Concept 7: franchise