Setting up a Franchise operation: methods and models

A franchisor needs to clearly define and devise a franchise business model, ideally by taking off with a pilot operation in the initial phase. A pilot operation is a company-owned outlet that is operated as a franchised outlet. Pilot operations give judgment of an operation in practice.

Due to lack of time and perhaps patience, a franchising business is often started these days without any pilot testing. This is more so when the proposed franchise business is related to an existing business activity and the franchisor keeps a check that it does not get copied by a third party.

A franchise business can broadly be established in two ways:

  1. A franchisor having a well-established business looking to expand the network through business format franchising.

  2. A newly formed firm, or even an existing firm that does not have enough experience in its domain of business activity, wants to penetrate it through business format franchising.

In either of the above scenarios, a business plan is a must, including knowledge of the products or services distribution model, proposed management structure and its competency for a franchise business.

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