Franchise business is now considered as part of the investment. How come? The main characteristics of this business movement have provided many advantages.
Generally, any company in a particular sector has the authority to grant the license if they own the intellectual property rights. It is this sharing of identities and licenses that makes businesses move faster with significant profits.
Companies like McDonalds, Starbucks, Pizza Hut, Subway and others are taking advantage of this opportunity. In fact, the scheme is successful and has been implemented in many countries today. Then, what underlies the creation of a business and what is its scheme? To find out, see the full discussion in this article.
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What is Franchise Business?
If you often say this word, it means you can speak French. Why? Because this word comes from the ancient French language which means freedom or synonymous with privilege.
As is the case with the meaning of the word, the concept of a franchise business is defined as having the right to sell certain goods or services. This model adopts the success of the system and its owner’s products by opening new branches.
Simply put, it can mean the purchase of intellectual property rights by the franchisee from the franchisor. The franchisor is the party that gets the license, while the franchisor is the licensor.
The characteristics that you always encounter are the similarity of the system, the quality of resources, the characteristics of the design of the place, especially the similarity of the products or services being sold.
So, for the franchisor this is also part of the company’s expansion efforts. In every initiation, there will always be a signed agreement. Thus, this forms a franchise business scheme that is different from others.
How is Its Scheme?
The scheme offered by the franchise business is quite easy and uncomplicated. Every time you want to buy rights or licenses for a company, you only need to pay a fee to the franchisor.
This fee means that the franchisee needs to pay to the franchisor to buy a license. These fees are usually paid before it starts operating. Cost variations depend on the quality and popularity of a company.
Fees usually cover major operational needs so that they are ready to be operated. Generally, the licensee only needs to focus on developing according to the agreement made at the beginning.
After it operates, there is a royalty fee franchise business that must be paid regularly. This fee is a fee based on sales and a percentage of profit earned. Usually using a monthly or quarterly count.
Each company has a different percentage rate. After that, there are raw material costs that have been prepared by the licensor to support operations.
In short, this reciprocal relationship is the scheme of the franchise. Both the franchisor and the franchisee contribute to each other with a marked agreement and understanding before it starts.
The advantages of this model can be seen, especially by running a company that already has a good identity from the start. Through a franchise business, the licensee can manage it with a profit.