Franchising is one of the new business opportunities that allow owners to operate their business from different locations without having to run the new units themselves. Business owners turn their business into a franchise and allow other small businesses or individuals to purchase the rights of trademarks, branding, and business practices. Many people purchase the rights of already famous businesses and open a branch in their location.
If you purchase the rights of a franchise, you are purchasing the brand name, its popularity, and customer base. The chances of growth and success are more with a franchise model than starting a business from scratch. The most essential step is to find a good franchisor and company you are aligned with and make it successful. It is always a challenge to handle a franchise business independently. Find a franchisor who has a good market reputation and is reliable.
Types of Franchises
There are different types of franchises that people can start in different industries. Some of the types of franchises are listed as follows:
1. Job franchise
A job franchise is one of the home-based or low-cost franchise opportunities you can start. You can start a job-franchise alone and at home. You can sell and provide the goods and services in your local area or within a specific area of your city or town. You have to purchase minimal equipment and tools, limited inventory, and related items to provide services to customers.
A job franchise includes a wide range of services. Some examples of franchise are IT accessories, repair services, real estate services, domestic cleaning, daycare services, coffee van, travel agency franchise, cleaning services, event planning, etc. You can select the right franchise as per your preferences and requirements.
2. Product franchise
The next type of franchise is product-driven. You can find various business opportunities in these fields. It is based on supplier dealer relationships. Product-based franchises deal with large products, like appliances, machines, car parts, etc. This type also offers a high percentage of retail sales. You can choose product-based franchises if you have a knack for IT products, machines, and appliances.
3. Business format franchise
Business format franchises allow the franchisee to use the trademarks, brand, and system of the franchisor’s business. Examples of the franchise as per business format include restaurants, business services, fast food outlets, and fitness and beauty brands. You can advertise the business as you like. The franchisor will provide you with a detailed FDD (franchise disclosure document) consisting of 23 points.
4. Investment franchise
Investment franchises are large-scale businesses and require a significant capital investment. Franchisees will have to invest a large sum of money in the business, either their own or a loan amount. They can ask the franchisor’s management team for access to the business operations. This type of franchise includes hotels and large restaurants.
5. Conversion franchise
The last type of franchise is the conversion franchise. It has a modified relationship between both the parties, i.e., franchisee and franchisor. In this type, a franchisee will adopt a training system, marketing programs, and client service standards. The franchisor usually gets a royalty fee for selling a part of the business rights. Some of the examples of this type include home services like air conditioning, electricians, spa services, etc. It is also considered one of the best online business opportunities in the market.
How to Get Franchise?
Let us now discuss the various steps required to obtain a franchise:
1. Know your budget
The very first step is to know the budget for your business. Create a budget and decide the type of franchise you want to purchase that suits your requirements. It is an essential step as it will set the foundation for your business. If you have a large budget, you can go with an investment franchise or business format franchise.
2. Conduct market research
The next step is to research the type of business you are starting. Research competitors and their products. Also, research the market prices of the franchise. If it is out of your business’s budget, don't waste your time; move onto another franchise that fits your budget.
3. Reach out to franchisors
The next step is to reach out to your shortlisted franchisors. You want to have as much information as you can to operate the business. You can also contact other franchisees associated with the franchisors, who can help you by sharing their experience.
4. Select the franchisor
Now, you have to decide the franchisor you want to go for. You can contact the franchisor and ask for an FDD. It contains 23 standard points for the franchisee reference about the business.
5. Sign the contract and start your business
After reading the document, sign the document and start your business. You must read every step of the agreement to understand the business operations and background. These facets include trademarks, registration, legal activities of the franchise business, financial statement and previous records, etc. The agreements are usually 5 to 10 years long. You can renew the franchise agreement once it’s over.
Thus, to conclude, there are many franchise opportunities that you can find in the market. You can select the type of franchise that suits your requirements, like job franchise, product-based franchise, business format franchise, or conversion franchise. If you are looking to purchase the franchise, understand the steps involved in the process as mentioned in the article.
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Q. What are the items in the franchise disclosure documents?
Ans. There are a total of 23 standard items in the franchise disclosure document. It includes the franchisor business name, establishment year, business experience, litigation, bankruptcy details, initial fees, estimated initial investment, franchisee’s obligations, restrictions on the sources of products and services, territory requirements, trademarks, obligations, renewal, termination, transfer and dispute resolution, outlets, contracts, and receipts.
Q. What are the types of franchises based on the industry?
Ans. There are several types of franchises based on industry. Some of the primary industry-wise types are:
- Children’s entertainment and education
- Personal services
- Fitness and health outlets
- Beauty and spa outlets
- Fashion outlets
Q. Is owning a franchise profitable?
Ans. Owning a franchise is profitable. If you want to start a franchise, it will be more profitable than starting your own business. It requires less capital and fewer risks. However, not all franchises may be profitable for you.
It requires a proper business plan, the right franchisors, a budget, target market, market research, competition, and significant knowledge of the business. The majority of franchise business opportunities have a good return on investment (ROI). So, purchasing a franchise is a good idea. Research the type of business you want to start and the steps required for starting a franchise business.
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