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INTRODUCTION- In a franchising agreement, the franchisor (a single party) provides or licenses certain franchisee rights and authority (another party). In order to grow a business, franchising is a common tactic Between the franchisor and the franchisee, there is a legal agreement. The franchisor grants the franchisee the permission to sell their goods, services, and to utilize their brand image and symbol.in franchise agreement. The franchisee can use the intellectual property of the franchisor and franchisor also provides assistance to the franchisee.

There are 4 types of Franchise models

1) COMPANY OWNED COMPANY OPERATED FRANCHISE MODEL

The abbreviation COCO stands for Company Owned Company Operated. According to the name of the model, the corporation owns and runs the business at a precise area. All initial investment costs and ongoing operating costs are covered by the franchising business. The basic requisites required for this model are

a) The franchisor should have good amount of capital investment

b) The franchisor can start with one showroom and the as the business makes a headway, he can allow franchisee to open outlets.

c)when a franchisor cannot get suitable franchisee, he can start his own flagship store at a good location on his own.

Benefits of this franchise model are

a) there is no division of profits

b) it gives a good opportunity to the franchisor to have his own exclusive flagship store where he can attract potential franchisee.

2)Company OWNED FRANCHISE OPERATED FRANCHISE MODEL

COFO stands for Company Owned Franchise Operated. In this arrangement, a franchising company handles capital expenditure, site selection, property deposit, and some other costs. The franchisee also handles other operating expenditures like wages, energy, and incidental expenses. The expenses are divided and incurred by both the franchisor and franchisee. This kind of model is used when, It is not the franchisor’s intention to raise operating costs. The franchisor lacks the time to manage the systems and policies for its workforce. Since most businesses engaging in the development of their company operations would rather handle it themselves, this model is rare and not very common in the sector. Examples of this kind of models are-hospitals, call centers etc.

Benefits of this kind of franchise are-

a) As a businessman runs the business, the shop performs with high productivity and profitability.

b) The franchising organizational assets aren’t squandered on irrelevant areas of the company and there is no running cost to pay.

3)FRANCHISE OWNED COMPANY OPERATED FRANCHISE MODEL

FOCO is an abbreviation for Franchise Owned Company Operated. In FOCO, the franchisee is accountable for all other big investments and owns the rental properties. While the franchisor company supervises the management of the retail chains. Furthermore, the company will distribute a fixed percentage of its revenue earnings to the franchisee. The franchisor has full control over the quality of the items provided and the quality of service provided by customers Franchisors that take significant care to safeguard their reputation, and thus customers get good quality products.

Benefits of this model of franchise are

a) Franchisees are not engaged in the everyday activities, permitting them to focus on their other ventures.

b) Interface for users is better since the company controls the guest experience.

c) Both the company and the franchisee are not required to pay for capital and operating cost

4)FRANCHISE OWNED FRANCHISE OPERATED FRANCHISE MODEL

Franchise Owned Franchisee Operated, or FOFO, is a business strategy in which the franchisee covers both for capital and running costs. Within the boundaries imposed by the franchisor, the franchisee supervises the entire manufacturing. Because it is straightforward in administration and management, FOFO is preferred by the overwhelming of both new and established businesses. Since the franchisees bear the majority of the expenses under this model, the franchisor accrues fewer costs. The franchise investor would receive the business’s premium brand. Furthermore, they make it available for a predetermined non-refundable amount (franchise fee) and a predetermined amount of time. The brands will choose products and rates for the store. Therefore, the franchise operator controls the business, and the franchise is accountable for paying all operating costs. Furthermore, the Franchise must provide the Company a share of its earnings.

Benefits of this franchise model are-

a) There are lots different franchising opportunities.

b) There are franchise choices for all economic levels.

c) A franchisee that is profitable receives an excellent return on their investment.

CONCLUSION

These are the four models of franchise business, and they are adopted depending on the operational, administrative and running costs involved. Among, the 4 four franchise model, the FOFO model is extremely common. A venture or brand should calculate all the costs involved including the salaries, wages, and the training costs and then take a decision regarding which model of franchise business it should adopt.

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