Franchise Model - Expanding Business Operations

Published by MBA Skool Team, Published on September 07, 2011

Every company takes tremendous efforts to make sure they create quality products, handle their finances optimally, train their human resources in the best possible manner and spend millions of dollars for marketing and branding. It is every company’s dream to reach out to as many people from their target-group as possible. Companies hire a sales team, train them, market their product via print media, TVC’s, internet marketing etc. But reaching out to a larger audience is the biggest challenge for any organization. And one method, where a business can spread its presence and reach out to many customers is a franchise model.


Franchise Model

A franchise model is one where an organization shares its product, service or brand with other entrepreneurs, who would like to work on a business model, where they would be working as a extended arm of that business. Franchise model allows a popular brand i.e. franchisor to be run on a contract basis by other small business units i.e. franchisees for a fee. It becomes a win-win situation for both the franchisor and the franchisee. The franchisor is benefitted by expanded operations and more reach, and the franchisee owner gets benefitted by using a popular brand name for his business, thereby leveraging on the strong brand loyalty of existing customers.

Due to globalization, brands have crossed over borders, and big brands don’t have a limited target audience. People get influenced by the internet, TV and other means of communication, and that leaves them impacted by a particular brand. But it is not possible for even a powerful brand to manage operations in every part of the country, leave alone the world. This is where a franchisee model opens up a door of opportunity for the company. Franchise model gives the company to expand its operations and also plays an important part in localizing the product as per the local requirements.

Some of the major brands in the world follow the franchisee model and are pioneers in their field. Fast food giants McDonald’s are the best example of having a franchisee model for their global operations, which has even allowed them to go for glocalisation. McDonald’s looks for expansion by looking for businessmen who are financially stable, have the expertise to control and train a team, and most importantly have the competence to sustain the brand equity of McDonald’s. If they feel that a business opportunity exists in a particular region, and that there are people looking to work as franchisees, McDonald’s gives them the permission and right to share their brand, thereby expanding its own operations. McDonald’s is just one of the popular brands along with Subway, which is another fast food brand working on the franchisee model.

In fact, all automobile companies like Tata Motors, Mercedes, BMW, Toyota, Honda etc work on franchisee model, where they look for expanding operations globally through a system where smaller business units showcase their products through dealerships. The retail industry too works on a franchisee model where giants like Tesco, Walmart, BigBazaar etc open up stores globally to target more audience. Apparel stores of major brands like Nike, Puma, Reebok, Adidas also expand their reach and presence using the franchisee model.

With increasing purchasing power and a better standard of living, the requirements of people all around the world is constantly increasing. This opens a tremendous opportunity for companies to showcase and sell their products, services or brand to as many people in their segment as possible. However, intense competition, the dynamics of economy and financial restrictions post a hurdle in expansion. But a solution for such a problem is expanding the operations with a franchisee model.


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