Many different types of businesses operate utilizing the franchise business model. Growing a business using the franchise business model has proven to be a very effective way of brand building. Mostly because it creates opportunities for many people (franchise owners) to invest and develop distribution points for the brand. All these distribution points combined can create significant brand value, synergy and brand equity.
The franchise business model is typically designed and constructed by the franchisor, and the relationship governed by the franchise agreement between the franchisor and the franchisee. Although each franchise system is unique and comes in endless varieties. Many franchise business models operate on a general concept that the franchisor is in command of the brand, and the franchisee is acquiring a license to operate a business utilizing that name.
Investing in a franchise business model is not an assurance of success. Each franchise system is designed and constructed differently. Some systems are designed, so the franchisor reaps most of the financial benefits and control, leaving the franchise owner bankrupt or marginally operating with little to no exit strategy. Others are mutually advantageous for all stakeholders including the franchisor, investors, employees, customers, vendors and the franchisee.
Some franchisors that use the franchise business model have seen better days and no longer deliver value to consumers because of changes in competition and the franchise value proposition.