How To Earn Money With Franchise | Franchise से कमाए लाखों | Secrets of Franchise Business

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Franchising is one way of many by which a business can expand. The key ingredient that a business must have that wants to consider expansion through franchising is something that someone would want to license from it to use in the operation of an independently owned business. Specifically, that something is a system for operating a particular successful business associated with a particular brand name (trademark).

Franchisors often operate corporate stores which they own and which replicate to various degrees the original business. The profitability model for these stores is usually equivalent to the financial modeling applicable to the original business.

For the franchisees of one of these businesses, its profitability model is similar. However, its ability to control aspects of its revenues and expenses is impacted by the system within which it operates. Those impacts are in the form of the financial costs controlled by the franchisor. Often, these costs are directly linked to the franchisor’s means for making money from its franchise system. There are various potential silos of charges which a franchisor can apply to a franchisee’s business. Each franchisor will pick and choose which silos best suit its system and its financial goals. These choices will fundamentally affect the attractiveness of its system to potential franchisees. Often, these costs are directly linked to the primary silos as discussed below.

1. Franchise Fee (Initial) Most franchisors charge an initial fee. This is often equated to the initial fee for the grant of the license to operate the system using the franchisor’s system and trademark(s). Franchise fees range in size. Against this fee, the franchisor must consider that it will incur expenses in granting a franchise which can include such things as brokerage fees and the cost of compliance with the applicable statutory disclosure regime.

2. Initial and Ongoing Training Franchisors utilize employees and others to train new franchisee operators/managers. Franchisees typically bear the cost in the form of a training fee. Franchisors may add a profit component to the training fee.

3. Ongoing Royalties/Fees Franchisors typically charge a royalty as a percentage of the franchisor’s gross sales or as fixed fees charged periodically (usually monthly). The royalty or fee is reflective of the underlying licensing arrangement. Franchisees usually pay these amounts without regard to their own profitability. They become a cost of operating like any other unavoidable fixed or variable expense.

4. Advertising Fund Franchisors typically maintain a fund to which franchisees contribute to permit the establishment and operation of advertising campaigns locally, regionally and nationally for the benefit of the system as a whole. Franchisees may be required to contribute a percentage of their gross sales, again without regard to their own profitability. o.

5. Sublet Rent Upcharges Some franchisors lease premises to be used by their franchisees in the operation of their businesses as a means of “land control”. They then sublet the premises to the franchisees. Franchisors with excellent covenants might be able to negotiate lower rents than could their independent franchisees. Some franchisors, if permitted by their leases, upcharge the rent paid by the subletting franchisees.

6. Supplies and Equipment Franchisees typically use a variety of supplies and equipment mandated by the franchisor. Franchisors mandate this use for purposes of quality control and consistency of customer experience. They also do so in order to take advantage of collective buyer power. The benefit of this buyer power may or may not be shared with franchisees. Franchisors might upsell the products to their franchisees directly or indirectly. They can also seek rebates from the system suppliers which, again, they may choose to keep for themselves or share with their franchisees.

7. Transfer and Renewal Fees Franchisors often charge franchisees fees if they wish to transfer their agreements or renew them. Some of these costs will be applied to the costs the franchisor will incur in the transfer/renewal processes. Sometimes their administrative and legal costs are added to the fees introducing a profit element to the franchisor.

8. Build out / Purchase Costs Franchisors often control the process by which franchised stores are built out or renovated. They may have affiliated businesses responsible for build outs or renovations. They may contract out the work and charge an upcharge to the franchisee responsible for paying for the work. These charges can cover hard costs such as the salaries of those franchisor employees managing this construction. The charges may well exceed the franchisor’s costs for being involved in the construction. As such, the build out or renovation of a store can yield profits for a franchisor directly and indirectly.