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How the Franchise Model of Business Works & Who Benefits

How the Franchise Model of Business Works & Who Benefits

Learn more about the franchise model, how it works, and why it requires a strong partnership between the franchisor and the franchisee.

What is the Franchise Business Model?

The franchise model is a method of expanding a business and distributing goods and services through a licensing relationship. The franchisor owns the overarching company, trademarks, and products and sells the right to use its name and concept to franchise partners. Known as franchisees, these individuals buy the right to sell the franchisor’s goods or services under the existing business model and trademark.

This concept benefits both the franchisor and franchisee for different reasons. The franchisor gets to expand their brand quickly without the need for excessive funding to open and operate multiple locations themselves. Franchisees join an established brand and get access to a proven business model, ongoing training and franchise support, and marketing programs.

Advantages and Disadvantages of the Franchise Model

Like most things in life, everything has benefits and drawbacks. Before deciding on a franchise investment, it’s important to understand what to expect once you sign the franchise agreement.

Pros of Franchising:

  • Reduced risk: Since franchisees can use an established blueprint to build their business, there’s less financial risk. Should the franchisee follow the steps outlined by the franchisor, they are more likely to grow a strong business.
  • Ease of financing: Lenders are more willing to loan to franchisees because franchisors do a considerable amount of vetting before approving them. Also, many franchisors have partnerships with banks who are able help franchisees get capital for their venture.
  • Network of franchisees: In addition to training, operations support, and marketing assistance, entrepreneurs who join a franchise get to connect with other like-minded businesspeople. Having a network of other business owners can help greatly should you want to collaborate or troubleshoot an issue.

Cons of Franchising:

  • Ongoing fees: In exchange for receiving support from the franchisor, franchisees are required to pay a royalty and ad royalty fee throughout the life of their agreement. These are usually a percentage of the franchisee’s gross income.
  • Less freedom: While the franchisor is trying to expand their brand rapidly, they still want consistency across all of their locations. So, while you may be the primary owner, you are obligated to use suppliers and vendors as dictated by the franchisor.

To fully comprehend the franchise opportunity, be sure to thoroughly review the brand’s franchise disclosure document (FDD). An FDD is a legal document that franchisors are required to provide to potential franchisees before a franchise agreement is signed. The FDD provides comprehensive information about the franchisor, its business operations, and the terms of the franchise, helping potential investors make informed decisions. It covers details such as fees, obligations, training and support, and any litigation or bankruptcy history.

Why Franchising Works for Service-Based Businesses

There are many different types of franchise businesses, but if you’re considering a service-based franchise, there are a few thoughts as to why this model works best.

  • Scalability: Service-based franchises often require less capital-intensive infrastructure, making them easier to scale.
  • Local presence: Service-based businesses often benefit from a local owner/operator who understands the community, which can lead to better service and local marketing efforts.
  • Economies of scale: As the number of franchises increases, the buying power of the whole network can lead to discounts on supplies and equipment.

Franchise with Always Best Care

Always Best Care is a trusted name in the home healthcare industry. Our brand offers a broad range of services including in-home care, skilled home healthcare, respite care, special care services, and assisted living referral.

Always Best Care provides an affordable franchise investment for new and seasoned entrepreneurs. Estimated startup costs range between $89,725 and $145,900. This includes our initial franchise fee of $44,900*.

To learn more about our senior care franchise opportunity, request information today, and someone from our team will contact you soon.

*Franchise fees vary per province.