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People who are unaware of this miss out on the best franchise opportunity. Every franchise model is unique. Many individuals are not familiar that each franchise model differs from the next. So let’s attempt to understand each franchise model in this article.
There are four different types of franchise models.
Let us understand their characteristics, advantages, and disadvantages.
Company Owned Company Operated, in short, known as COCO. As the name suggests in this model, the company owns and operates the business at a particular location. It is the Franchising company that bears all the capital and operational expenses. This model is suitable for the franchisors with following features
The company-owned outlets that we come across are examples of COCO. These company-owned outlets exist across the industries. From automobiles to computers, from Jewelry to fashion. Across the swathe of sectors, we can find many examples of company-owned and company-operated models.
Company Owned Franchise Operated, in short, known as COFO. In this model, a franchising company does capital expenditure, site selection, property deposit, and some other expenses. At the same time, the franchisee takes care of additional operational costs like salary, electricity, and sundry expenses. One payment that can go either way is rent. In some cases, franchisor bears the rent, and in some cases, the franchisee takes care of it. Some expenses are incurred by either party. That depends on the terms and condition set by the franchisor.
In this case, initial expenses for the franchisee is low. An important thing to remember is, with lower investment, there would be lower profit/revenue share for the franchisee.
A franchisor uses this model when
A franchisee (contractor) manages the canteen in corporates, factories, hospitals, and other establishments owned by a company. Another famous example is call centers that handle inbound, or outbound customer calls on behalf of a company. Then we have company outlets, especially at a prime location, managed by a franchisee but owned by the franchising company.
Franchise Owned Company Operated, in short, known as FOCO. In FOCO, it is the franchisee that owns the property and does the other capital expenditures. While, franchising company manages the store/outlet operations . This model is also known as Franchise Invested Company Operated.
FOCO is one of the more popular models with the international food chain in India.
By having their employees, the franchisor controls the quality of the product served and the service that customers experience. This control over the quality of products and services ensures that the customers get what they expect from the brand. Franchisors who are very careful about their brand name and image would take responsibility for the end-user experience themselves. They cannot let the critical aspect like end-user experience in the hand of franchisees lest they spoil it.
Any business that cares deeply about its brand reputation will keep its customers’ experiences to itself. a lot of regional and global food networks. several electronic brand names. others businesses in the jewelry industry, as well as others in other industries, have franchise owned and operated business structures.
Franchise Owned Franchisee Operated also known as FOFO, which means that a franchisee provides for capital and operational expenses. The franchisee manages the entire show within the guidelines given by the franchisor.
Most of the upcoming and established brands take the FOFO route as they find it easy to run and manage. In this model, the franchisor has minimal expenses as most of the costs are born by the franchisees.
As franchisee has made most of the investment, so it gets the major chunk of revenue. While a franchisor gets a small share in the form of royalty.
FOFO model is risky for the franchisor as the end-user experience in the hands of franchisees. Thus it becomes important for the franchisee to ensure that the franchisor’s brand name does not spoil due to their business practices.
Every franchise opportunity in which a franchisee makes the entire investment and also takes care of all other expenses is an example of a FOFO model. More than 90% of franchise opportunities fall in this category.
Every franchise business concept has a single, distinct function. The advantages of using that paradigm for that particular application outweigh the drawbacks. Additionally, when a franchise model is employed for a broader purpose, its flaws become more apparent than its advantages. A franchisee must thus be clear about why they want to buy a franchise. and coordinate the goal with the attributes of the relevant franchise model.The only time a potential franchisee should proceed is if the purpose and the feature match.
Goto Mo’ Ko is an exciting Filipino food concept where our franchisees and the franchisor works together in creating a business model that provides a fun-vibe experience for our customers, and an enjoyable environment for all our stakeholders including our supplier partners.