Investing in a franchise can be an appealing business venture for aspiring entrepreneurs looking to step into the world of business ownership. A franchise offers a well-established business model, a recognized brand, and ongoing support from the franchisor. However, not all franchises are created equal. Some have stood the test of time and achieved remarkable success thanks to their proven franchise models. Here we will explore the concept of proven franchise models and highlight some successful examples that have unlocked the path to success and growth for franchisees.
The Benefits of Operating a Franchise
Reduced Risk: Investing in a franchise with a proven model reduces the inherent risks associated with starting a new business from scratch. The tested and proven systems have already demonstrated their viability, giving franchisees a higher level of confidence in their investment.
Established Brand Recognition: Proven franchise models are often associated with well-known and trusted brands. This established brand recognition can attract customers to the new franchise location from the outset, providing a head start in building a customer base.
Ongoing Support and Training: Franchisors with proven models typically provide comprehensive training and ongoing support to franchisees. This support can include initial training, marketing assistance, operational guidance, and regular communication to ensure franchisees have the resources and knowledge to succeed.
Access to Best Practices: Successful franchise models have already identified and implemented best practices in various aspects of the business. Franchisees benefit from this collective knowledge, allowing them to avoid common pitfalls and maximize efficiency.
Economies of Scale: Proven franchise models often benefit from economies of scale in purchasing, marketing, and other areas. As the franchise network grows, franchisees can enjoy cost savings and competitive advantages.
Franchise Models
Known by the abbreviation COCO, the Company Owned Company Operated model involves a business arrangement where the company both owns and manages the operations at a specific location. In this setup, the franchising company takes on all the financial responsibilities and running costs.
The Company Owned Franchise Operated model, abbreviated as COFO, involves a franchising company covering initial capital expenditures, site selection, property deposits, and certain other expenses. Conversely, the franchisee is responsible for additional operational costs, such as salaries, electricity, and miscellaneous expenses. Rent payments may be handled by either party, depending on the terms and conditions set by the franchisor. Ultimately, the allocation of expenses and responsibilities is determined by the specific agreement between the franchisor and franchisee.
Franchise Owned Company Operated, or FOCO for short, is a business model where the franchisee owns the property and handles the capital expenditures, while the franchising company is responsible for managing the store or outlet operations. This model is also referred to as Franchise Invested Company Operated. By employing their own staff, the franchisor maintains control over the product quality and customer service. This control ensures that customers receive the expected brand experience.
Franchise Owned Franchisee Operated, commonly known as FOFO, is a business model in which the franchisee bears the capital and operational expenses. Within the framework provided by the franchisor, the franchisee takes full responsibility for managing the entire business operations. Many emerging and well-established brands opt for the FOFO route due to its ease of operation and management.
Under the FOFO model, the franchisor incurs minimal expenses as the majority of the costs are shouldered by the franchisees. As the franchisee has made a significant investment, they receive the major share of the revenue, while the franchisor receives a smaller portion in the form of royalty fees.
Successful Franchises
McDonald’s - One of the most iconic and successful franchise models globally, McDonald's has built a proven system for standardized food preparation, customer service, and marketing. Its COCO model focuses on consistency and efficiency, making it one of the largest and most recognizable fast-food chains in the world.
Subway - Known for its customizable submarine sandwiches, Subway is one of the most recognizable and successful quick-service restaurant franchises worldwide. The Subway franchise operates under the FOFO model, wherein individual franchisees own and invest in the Subway outlets while managing the day-to-day operations.
Easily one of the more common franchise models, other examples of FOFO modeled franchises include UPS and 7-11.
Kentucky Fried Chicken - While KFC primarily operates under the FOFO model, it also has company-owned outlets that adhere to the FOCO model. The FOCO model allows KFC to maintain direct control over crucial aspects of the business, such as product consistency, service quality, and brand image, while still benefitting from the revenue generated by those company-owned outlets.
Dominos - Domino's is a well-known global pizza chain that offers a variety of pizzas and other Italian-inspired menu items. While the majority of Domino's outlets operate under the FOFO model, the COFO model is also employed in some regions. Under the COFO model, the franchisor, Domino's Pizza, takes on the responsibilities of property ownership and initial capital expenditures, while the franchisee is responsible for managing the store operations, including staff hiring, customer service, and daily business activities.
By leveraging established brand recognition, refined business systems, ongoing support, and access to best practices, franchisees can mitigate risks and capitalize on the success of an established business model. Aspiring entrepreneurs looking to invest in a franchise should carefully evaluate the track record and success of the franchise model to ensure they choose a proven path to their own business success.
