Franchise Development
Franchise is a method of business expansion by which the owner of a business, the franchisor, grants to investors, the franchisees, the right to operate a business in the manner and style the company has already developed.
It is a comprehensive business relationship, not just a buyer-seller relationship, best described as a pooling of resources and capabilities to accomplish marketing, distribution and sale goals.
The relationship is governed by a franchise agreement, which runs for a defined but renewable period of time, usually from five to twenty years.
The franchisor charges an initial upfront fee to the franchisee, payable upon the signing of the agreement. Other fees such as marketing, advertising, or royalties may be applicable and largely based on how the contract is negotiated and set up.
The franchisor charges an initial upfront fee to the franchisee, payable upon the signing of the agreement. Other fees such as marketing, advertising, or royalties may be applicable and largely based on how the contract is negotiated and set up.
International franchising
International franchising is a strategic way to reduce dependence on domestic demand and market, generate new revenues and develop worldwide profit centres.
Extending a brand globally through franchising involves low risk, requires minimal investment and can be extremely profitable.
It’s also an opportunity for franchisors to rely on the expertise of experienced investors in order to understand overseas consumers and markets, and also take advantage of specific business opportunities.
Those overseas investors can also overcome language and cultural barriers of the targeted market, and are more likely to be familiar with the local area’s regulations, political climate and policies.
Challenge & Strategy knows the challenges and complexities of developing any business model Internationally.
That’s why, with our “done with you” philosophy, we work closely with franchisors to identify and develop the appropriate strategy for them to succeed on international strategic markets.
Appropriate strategy that itself involves several players from the franchise world and the use of the franchise models below:
- Direct Franchising
Model in which the franchisor retains full control and licensing. In a direct franchising model, the franchisor continues his role in a very similar way compare to the domestic franchising. This kind of franchising requires a lot of resources and time on the part of the franchisor, as he will be providing the same level of training, recruitment and support to prospective franchisees as the franchise expands rapidly and the difficulties of moving into a new market are overcome. Direct franchising is usually carried out remotely due to the centralized nature of the model, and works better in expansion to markets with similar cultures, languages, legal systems and regulations.
- Master Franchising
One of the most popular international franchise models, is considered to be one of the simplest ways to expand a franchise overseas. In this model, the franchisor chooses a master franchisee for the targeted country or region, then grant him the rights that are usually very similar to the franchisor’s rights in a local franchise system. That rights are exclusive to the master franchisee, and gives him rights to use and market the brand in order to open company-owned outlets and appoint prospective franchisees. Most master franchisees are from the target country and are selected on the basis of criteria such as in-depth knowledge of the overall business environment.
- Regional Franchise
The franchise model used when moving into a larger country or area, where it can be difficult for one master franchisee to manage the franchise operations across the whole area. The target country is usually divided into regions, which are then operated similarly to a master franchise, with each region containing a regional master franchisee, and sub-franchisees below them.
- Area Development
Franchise agreement in which prospective franchisee agrees to open a specified number of business units within a given geographical area and timescale. To secure exclusive rights, the prospective franchisee pays an up-front development fee, plus a franchise fee every time he opens a new unit. It’s a significant investment, but there are usually financial incentives available when additional branches are open. In basic terms, franchisors reward the area developer for buying in bulk and building the brand successfully in his territory.
International Franchise Sale
The exponential growth and sustainability of networks abroad are two axes by which the success of a franchise takes its anchor. Thus, a good understanding of the challenges related to the development of international franchise networks remains an asset in which we have always capitalized on, at Challenge & Strategy.
With our solid international franchising background, we help both franchisors and franchise candidates better meet challenges in the areas of franchise sales and franchise support.
That translates into:
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Developing and implementing of marketing strategies to attract the best investors,
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Attracting quality prospects and improving their conversions,
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Helping international candidates find the most suitable franchise,
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Regular reviewing of the performance of each franchisee against the standards that are documented in the franchise agreement,
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Developing and implementing of action plans for franchisees to maximize their strengths and improve their weaknesses for better productivity and profitability.