Growth Model - Franchising

Definition and examples:

A franchise means buying the rights from another business to distribute its products under its name. 

• A franchisor is the individual / firm that offers franchises. 

• A franchisee is the individual / firm that purchases and operates the franchise.

The franchisor offers a successful business model, brand awareness, required training and development for the franchisee and method of operations (mothership).

The franchisee provides the start-up capital and labour, operates the franchise business, and agrees to follow the terms and conditions of the agreement (sentinel).

The success rates for franchise businesses are very high in comparison to independent businesses offering similar products. This is because it has an easily recognisable and trusted name / brand, and a proven product desired by consumers.

Some franchise businesses own and operate some of their stores and franchise other stores.

Businesses looking to expand rapidly can sell franchise opportunities. This reduces the capital expenditure required (the franchisee provides this), while also generating fee income and a percentage of the profits / revenue of the franchised store.

Successful franchises include McDonalds, Boost Juice, Domino’s, KFC, Pizza Hut, Subway, 7-Eleven, Gloria Jeans, Poolwerx, Coffee Club, Battery World, Gelatissimo, Roll’d, Skinny’s Grill, Baker’s Delight, Harvey Norman, GyG.