Franchising is a superb avenue to explore while starting a business. Before investing money in the franchise, entrepreneurs should look for best Franchise Business Models which can work. While doing so, there are many questions that come up in everybody’s mind-
Which Franchise Model will bear the most benefits?
How are these models different from each other?
What are the pros and cons of these models?
If you're one among them, then throw away your worries, we've got it covered for you.
COCO (Company Owned Company Operated)
- The COCO franchise business model is primarily run by the franchisor itself and the franchise partner only has a stake in the property.
- COCO model offers franchisees a unique opportunity to generate profit from an established and well-loved brand.
- The only thing required in this model is an investment. The franchisee does not have to engage in the daily running and gets a guaranteed return.
FOCO (Franchise Owned Company Operated)
- In the FOCO Franchise Model the initial set up cost is borne by the franchise or the owner of the business.
- The franchisee gets a percentage of revenue or minimum guarantee while the running cost is borne by the company.
- The company will be responsible in operating it and taking care of all the things necessary to run an outlet, such as Marketing, Logistics, Staff wages, Electricity, rent etc. and the franchise is the owner of the business.
- The company will also have to give a fixed percentage of profit shares to the franchise owner.
FOFO (Franchise Owned Franchise Operated)
- In the FOFO business model, the company basically rents out the brand for a pre-agreed time period and a particular non-refundable sum.
- Merchandising and money are decided by the company although the company provides a few similar benefits like in the FOCO model; such as marketing, print and electronic.
- This Franchise Model is owned by the store, that’s why the operational cost has to be borne by the franchise itself. The Franchise has to assured the percentage share of revenue and the minimum guarantee to the company.
- This model is adopted for faster expansion of business/brand by the company.
For example; in a Fast Food Chain where the business is operated and owned by the franchise but regular audits are done by the company to ensure standards are maintained.
COFO (Company Owned Franchise Operated)
- This Franchise Business Model is adopted by companies when they want to reduce the operational expenses.
- In this model the company leases the operations to an interested franchise to ensure standards are adhered to.
- The business ownership still lies solely with the organization, the franchise partner can be changed when the company identifies a more profitable and efficient franchisee.
- This model is adopted by the company only in well established markets where the company has operated and got a high return on investment.
FICO (Franchise Invested Company Operated)
- This business model is similar to FOCO but unlike the FOCO the franchise does not involve themselves in the business operations.
- Only a fixed amount is paid to the Franchisee by the company as an investment done by franchisee in the business.
- In this model there can be multiple franchise partners and investors as the company runs the business operations with end-to-end control of the supply chain.
Hope this account has given you a clear Idea about the different kinds of models that are present in the Franchise Business. Hence, evaluate all propositions before getting into the franchise model depending on which side of the table do you stand.