For Instance, restaurants like McDonald’s, KFC, Taco Bell, and Pizza Hut beneath Yum! Brands, IHOP under DineEquity, and Buffalo Wild Wing have chosen to use the franchise model, expanding rapidly and internationally.
In near future, we will see a franchising blossom, because cloud computing tools are revolutionizing the company.
Why not McDonald’s Corporation only open restaurants if one hamburger joint rolls in a few millions annually? Burger King and Dunkin’ Donuts are nearly all franchised restaurants.
Why do they franchise the company? It is all about synergy. The franchisee receives a functional business model. The franchisor has its fees and international reach.
How the Franchise Model Works
The franchisee signs a contract to sell the franchisor’s (McDonald’s, as an instance ) branded products.
The franchise is responsible for creating the restaurant, staffing, overseeing daily operations, and handling costs for running the restaurant. The franchisor (McDonald’s) may have the location of this restaurant and let it a franchise.
Normally, the franchisee pays an initial fee and exemptions from the sales. In the event the franchisee leases the location from the franchisor, then the franchisee pays rent also. Thanks to removed operational costs, the margins are higher for the franchisor.
Therefore, you want to begin selling Big Macs? First, a franchise must have at least $750,000; 40 percent of it has to be in cash and non-borrowed assets.
The franchise needs to pay McDonald’s a $45,000 beginning fee, and a monthly service fee equal to 4% of gross earnings. Plus McDonald’s get around 8-12% of franchisee’s monthly earnings as a lease, also.
For KFC, Wendy’s, and Taco Bell the franchise startup costs are comparable but with a number of different chains, the fiscal burden is a lot lower.
Subway joint costs just approximately $110,000 to $260,000 to get started. Minimum liquid assets required by Subway are $30,000 to $90,000.
For the franchisor, utilizing the franchise model allows the company grow much quicker since the franchisee provides the funds for making the franchise socket ready for operation. The franchisor faces a lower risk if the shop isn’t performing well.
The franchisor has more time to concentrate on goods and operation research. There is less everyday execution to deal with. And let’s not forget the motivation.
A franchise operation is owned by the franchise. It’s a lot better to have a financially responsible person running a chained restaurant than to employ a local supervisor, who may or might not be enthusiastic enough in conducting it.
The drawback of the franchising model is that your organization has less control over local direction, but there are contemporary systems which help overcome the problem.
The Future of Franchising
Holding a franchise was complex. A chain of fast-food restaurants, stores, beauty parlors, gymnastics and fitness centers or some other lucrative franchise business must provide the customer a consistent quality, branding and price coverage.
Apart from that, regional and seasonal specials, weekend earnings etc. are needed. The franchisor has to track the cash flow and convey a lot.
Fortunately, franchise management has just been made easy thanks to Web and cloud computing. ConnectPOS has implemented all of the tools required for franchise management.
So, if you wish to expand your business, it is a fantastic idea to franchise it to other people. With ConnectPOS, you obtain a franchise master account. Store owners are subsequently supplied their own ConnectPOS accounts, which contain built-in synchronization tools together with the master account.
The franchisees have thus functional store applications with promotions, gift cards and loyalty programs and all. Want to conduct a marketing campaign throughout the franchise chain?
Take a few minutes to define campaign rules, and voila, it is conveyed to each of the franchise owners. You are able to make some effort aspects optional, granting your franchisees freedom and flexibility. You as a franchisor have the information running in automatically, so you’re in control without being intrusive.
Many blooming retail chains such as Rapid Refill or Ben’s Soft Pretzels are using ConnectPOS franchise program.
If you’re already holding a franchise or intending to expand your company by franchising, try our Franchise Management Software for free or request a demo.
There are no technical limitations for one to become the next McDonald’s.