What are Types of Franchising Models
In India the fast food service industry has changed a lot from homegrown standalone family run business ventures to international partnerships with various business models. Especially the Quick Service Restaurants and Fast Food Franchise model remains one of the most attractive operating models for international brands that keep an eye on India.
A Franchising is basically a person or a company that is given the license to run a business under a particular brand name. Trademarked by the Franchisor. The former purchases the Franchise from the latter. The Franchise is no not a free place it also has rules and under all circumstances must follow the rules and regulations that are established by the Franchisor. Generally, the Franchise has to pay an amount as a royalty to the franchisor. I this blog we will talk about why Franchising is one of the lucrative ways of restaurant business expansion and the various Fast Food Franchise models available.
Why You Should Consider Restaurant Franchising
Restaurant franchising is essentially used for expanding the business and distributing goods and services to meet higher consumer demand. In simpler terms it is and relationship between the brand owner and the local operator to skillfully extend the already established business. Prior to starting the operation of the franchise, the franchisee makes a required payment or commits to make a required payment to the franchisor or its affiliate.
Now fast food restaurants and quick service restaurants are one of the most blooming formats in India. International brands, as well as local brands that want to scale across the country, are readily accepting the franchising model.
Types of Fast Food Franchise Model Across India
The four types of fast food franchise models that can take fast food and quick service restaurants to new heights are as follows:
1. Master Franchise Model
International Franchising companies are playing a very big role in the Indian food market. Master Franchise Model the amount of investment is limited only to development, franchisee training, location assessment and consulting expense. With the mutual understanding on both sides the international retailer charges a royalty fee from the Franchise who runs the business in India. In turn, the Franchise can open its outlets or have an agreement with sub-franchisees that in turn open outlets under the Franchisor trademark. When a contract exists between them, the Franchise charges a Franchising fee from the sub-franchisees based on certain criteria, for example, a fixed percentage of sales. Some popular brands that use this Master Fast Food Franchise Model are Domino’s Pizza, McDonald’s, KFC, and Pizza Hut.
Advantages of Master Fast Food Franchise Model
1. Since the person running the business in India is a local expert, they have better connectivity and understanding of culture and geography. This information can mainly be used to use resources in the country and scale the business further.
2. The responsibility of the franchisor is to give the training to the restaurant staff. After the training if the franchisor feels there is still a huge gap in the skill levels the Franchisor would still have to provide training. This is done to ensure consistency across all the outlets since the name of the Franchisor Brand is at stake.
 3. Since the Franchise does have an intricate knowledge of the country as to which flavour works in a part of the country, they are required to pass this knowledge to the parent company immediately. If the Franchisor agrees that the flavours are upto to standards, they can bring the regional regular menu. If Franchise does want a change in their approach or wants to do something different he can have a say in the restaurant operations. However, the ultimate decision lies with the Franchisor. For example, McDonald chains in Thailand have different menu items than the ones that are available in India.
2. Company Owned and Franchise Model
This is a model wherein the international franchisor establishes its own office in the country and provides the necessary help required by the franchisee in setting up the business. The help provided to setup office and give them essential things need to run the office smoothly. The office setup a team that solely works for the franchise in the country and is responsible for creating the brand image in the country with the brand like Golic Vada Pav, Jumbo King, Berco’s, KFC, Pizza Hut, etc.
3. Company’s 100% Ownership
In the company owner model brands set up their business with own investments. This model ensures that the brands have complete control over the business and take major decisions. In this fast food franchise model investment requirements are very high, and the probability of risk is very high. Responsibility of the company solely depends on business for instance, creating its brand image, product development, quality control, etc. Indian brands who at the top of the game right now use this model are like Cafe Coffee Day, Halliards, Fast Tax and Bicameral, and international brands like Taco Bell.
4. Joint Venture Model
A Joint Venture Model is one where an international entity enters a joint venture with a local entity to create a new entity that acts as a master franchisee. This Master Franchisee has the full authority of the operations of the international brand in the country. The partnership with the local partners is important because they have the knowledge of the local area and can give insight on how to work they also provide real estate to the international brand. With effective and substantial help from the master franchisee, the international brand can scale faster in the country.
The contemporary in the industry wherein International brands are entering into a joint venture with a private equity/Venture Capital firm, rather than the business houses in India.
Controlling the quality across all the outlets are a significant problem in Franchising, not only concerning the product but also in terms of service, ambiance. You can get the solution of this problem by using a robust restaurant franchise management software. All the Franchises business have to follow certain brand rules so that the customer expectation is never broken. Hence, the power of the franchisees must be limited but not restricted. They should be given the authority to act immediately if things go wrong and afterward they can inform the brand.
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