Starting a business through the franchise model now a day has become really simple because consultants like PROPERTYYY.com has put together all brands in a single basket. Where you can go and choose a brand that suits your persona and meets your requirement. But thorough research is important before you approach a consultant.
So today, we have compiled a list of franchise business models of Brands that you must be aware of. It would help you understand what’s business model run brand you can opt for.
There are five franchise business models:
(Company Owned Company Operated) – COCO stands for Company Owned and Company Operated, where the brand owns the franchise store unit and operates the business itself. It basically does not have to do anything with franchising.
(Franchise Owned Company Operated) – In the FOCO model, the initial set up cost is born by the franchise or the investor. The running cost is borne by the company and in return, the franchisee gets a minimum guarantee or percentage of revenue earned. And the franchise investor is the owner of the business, and the company will be responsible for operating it and taking care of all the things necessary to run an outlet. The company will also have to give a fixed percentage of profit shares to the owner of the franchise.
(Franchise Invested Company Operated) – This model is similar to FOCO but the difference here is unlike FOCO the franchise does not involve themselves in business operations at all. Basically, only investment is made by franchisee/investor in the business. The Company runs the business operations with end to end control of the supply chain.
(Company Owned Franchise Operated) – This is where the company invests in the franchise business but you operate it as per the directions set by the brand. The returns for this can lie somewhere between the FOCO and FOFO model. This is rare and not very common in the industry because most companies investing in the expansion of their business operations would prefer to run it on their own.
(Franchise Owned Franchise Operated) – The company basically rents out the brand name to the franchise investor for a particular non-refundable sum (franchise fee) and for a pre-agreed time period. Prices and merchandise are decided by the brands. So, the franchise investor is the owner of the store, and all the operational cost has to be borne by the franchise itself. The Franchise has to provide an assured minimum guarantee or percentage share of revenue to the company.
Usually, a brand starts operations with the COCO franchise model and getting well-established, the company gets into a franchise model to expand its footprints in other parts of the region. The most common models opted by brands for expansion are FOFO and FOCO models.
FOFO franchise model requires high investment from the investor as all Operations, Marketing, Advertising, Logistics, Electricity, Staff wages, rent etc. is looked after by the investor only. Moreover, it is less preferred by the brand because generally some years, the franchisees take hold of things and don’t adhere to company policies. Which causes a decline in the brand value.
As a result, the brand and the investor usually is seen preferring FOCO franchise model as it poses minimal risks to both the parties.
We hope that you find the franchise business models helpful. Please feel free to contact us if you wish to know about franchising.
CEO & Founder – PROPERTYYY.com
Vishesh Rai Buffett is an Indian entrepreneur and technology evangelist by heart. He is the Founder and chief executive officer of PROPERTYYY.com, the only Real Estate Consultancy Chain in India.