Different Franchising Models and which are right for your business
What is Franchising?
You must have seen many stores of Starbucks, McDonalds, and Pizza Hut in a city or different cities, you wondered why? The answer is franchising! In the marketing and distribution process of franchising, the owner of a business system (the franchisor) offers a single person or group of people (the franchisee) the right to operate a company that sells goods or renders services using the franchisor's business system.
In essence, you buy an already-built company and adapt its methods to the location you select. The business owner, on the other hand, gains by not having to invest in new locations or units. Instead, they sell their products or services at authorized retail locations, which strengthens the presence of their brand.
There are 4 main Franchising Models
1) COCO (Company Owned Company Operated) - As the name suggests, it is clear that the company or brand itself owns and manages the business. The company invests its own money in the franchise & all the operations are managed by the employees of the company.
Examples: Lenskart, Titan, Reliance Jio mart
2) COFO (Company Owned Franchise Operated) - It is basically, where the company invests in a business and the franchise operates it as per the company’s guidelines. It is very rare and not seen in the market.
3) FOCO (Franchise Owned Company Operated) - The franchise investor is considered the owner of the company; he is responsible for the extra capital & expenditure of the company. Operations are all taken care of by the company and also has to give a certain profit ratio to the franchise owner.
Example: Bistro 57, Pizza Xpress
4) FOFO (Franchise Owned Franchise Operated) - The franchise investor becomes the owner and has to manage all the operations. The Company gives its brand name in return for a franchise fee which is non-refundable and for a predetermined period. People often prefer this franchise model, because they want to expand their business without spoiling it.
Example: La Pinoz
How to find which franchise model is a good fit for you:
- Decide your goal - Do you want to invest in a franchising business as a part-time owner or full-time? Do you see this as a long time commitment? This will help you to decide what type of Franchise business you should invest in.
- Do your research - Go through the types of franchising models, and decide which you would like to invest in. You also have to think about the investment it will take.
- Selecting a category - Very wisely you have to choose the category you want to invest in. It should be of interest and profitable too.
- Talk to experts - If you are getting trouble making decisions, you can always talk to Franchise Consultants. Get verified consultants at Perito | Find A Consultant
These are Popular & most profitable franchise categories
As this category stands first in the franchise business, it has many sub-categories like coffee shops, fast food chains, bakeries, pizzas, ice-creams, food vending machines, etc. According to 2019 data, there were 2,00,000 franchise outlets in India. The franchising sector in India is expected to reach USD 100 billion by 2024, rising at a rate of 30-35 percent each year.
- It takes minimal investment to start a business and you don’t have to pay for marketing or interior anything
- The food business is always in demand and you don’t have to worry little if you choose the right brand to work with
- People are so busy & have no time to cook food at home, so they prefer these fast food joints
- You don’t have to worry about Branding, brand- marketing, and mainly the recipes as everything comes within the brand guidelines
- This business gives job opportunities to many of those who are in need of a job
- You see a growing profit and a good number of sales if your brand is recognizable
- Buying a food franchise is not always an easy thing. Some of the well-established brands charge a high amount as a franchise fee
- You have to follow the company rules as you have to maintain the brand image
- You cannot use your creativity and ideas to run the business
- You get to face very much competition while running a food franchise sometime from your own brand
- If you don’t have a good location and the right people to work for you, it can spoil the brand's reputation
Famous food franchises in India -
Domino’s Pizza -
Stores- They have 1500 stores across 264 Indian cities.
Investment- INR 30-50 lakhs.
Profit- Monthly profit of 2-3 lakhs.
Stores- 412 locations in 100 cities across India
Investment- 50 lakhs to 1 crore
profits- 2 to 5 lakhs per month
(Fast Moving Consumer Goods) Companies- These companies sell products that we use in our day-to-day lives. They have a large demand and supply. We visit supermarkets on a regular basis where these FMCG products are sold. Why go to different stores for different products when you can get all of them in one place? E.g. D-mart, Big-bazaar .
- People often shop/ spend more & go beyond their shopping lists, and this benefits The FMCG companies
- You don’t have to make a lot of effort in marketing products as the brand is already well established
- Even if these products also have an online seller, it doesn’t decrease the number of customers who physically visit the store.
- You can’t make decisions about what products to keep in the store and what offers to use, as all these things are decided by the brand itself & will be the same at every store.
- The margin in this business is up to 30%, which makes it challenging to gain profitability.
Famous FMCG companies/store examples
Investment- INR 1.5 to 2 crores
Franchise fee- 25,000
Area required- 1,000 sq. ft
Investment- 3 to 5 lakhs
Area required- 1,000 to 3,000 sq.ft., parking facility essential
Profit- 3 to 15% commission
(Gym chains/ yoga institutes)- People are highly aware & conscious about their health nowadays. Today’s youth talks all about gyming, protein diets & gym supplements. Not only bodybuilders but those who want to stay fit are also considering gyms as great options. You can choose Gyms or Yoga institutions as both the franchises business has its respected audience which is great in numbers.
- As your brand is well-known and established, you don’t have to work hard on marketing the brand
- You don’t have to target the audience, as the popularity of the brand is enough for the consumers
- Will likely receive business plans, procedures, policies, and rules ready-made from the franchisor
- The amount you have to invest in the studio you choose, the equipment you get, and the maintenance is very high
- You can’t use your creativity in your business as everyone decision is taken by the brand only
- Maintenance issue can occur if the company is not co-operative enough
Gyms- 125 outlets in India
Investment- 2.5 to 4 crore
Area required- 5000 to 7000 sq. ft.
Gyms- 7 outlets
Area required- 5,000 ton 15,000 sq. ft
Franchise fee- 46,00,000
- Retail (Fashion)
Because consumers' needs for fashion are ever-changing and eternal, the clothing business is always in demand. This sector also enjoys increased profitability. You will be able to market their product line and business plan if you own a clothing franchise from a well-known company While opening your own business requires far more money, choosing a franchise is always much more superficial. You have access to a variety of clothing franchise alternatives. So go ahead and choose one that suits you.
- In this case also the brand name matters
- You don’t have to worry about the trends & in general re-stocking, the clothing items
- You get high margins in this business
- Nowadays you don’t have to worry about having a physical store but you can also have an online store or website. Or you can join your store to an e-commerce website.
- Gaining customers’ trust is not an easy task
- If your brand has an online store, then there might be a problem and this can affect your sales
- The pandemic has made people shop online, which can decrease the number of walk-ins in your store.
Well-known retail franchise businesses in India:
Jockey India -
Stores- 150 franchises in the country
Revenue- 10,00,000 per month
Stores- 950 across India
Area requirement- 600- 1200 sq. ft
Investment- 30 to 50 lakhs
Conclusion: We have tried to explain types of the franchise and how they work. By considering all the examples & their requirements you can choose what type of franchise is best for you. If you have money and want to start a business, a Franchise business is a good idea. In this, you don’t have to worry about branding -marketing of the brand, by hiring the right people for the right job you can free yourself from working full time. There are many popular brands, from which you can choose one! If still in doubt, you can talk to a Franchising Consultant, who can help you in planning, investment, or sales