Benefits of franchising for franchisees and franchisors

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Benefits of franchising for franchisees and franchisors

Franchising in Vietnam is the process of transferring the right to use a business model, which may include a trademark, from the franchisor (the owner) to the franchisee (the licensee). Both franchisors and franchisees can benefit from franchising in the following ways:

Franchisee Benefits:

  1. Established Brand: The franchisee gets to use an established and reputable brand in the market (the franchisor must have operated for at least one year before franchising). This helps the franchisee save time and effort in building a new brand and attracting customers.
  2. Knowledge and Experience: The franchisor usually provides the franchisee with knowledge and experience accumulated during the brand’s development. The franchisee can learn from the franchisor’s successes and failures and apply them to their own business.
  3. Support and Training: Through the franchise agreement, the franchisor typically provides support and training to the franchisee. This includes providing operational processes, management techniques, marketing strategies, and sales training, helping the franchisee quickly access the knowledge and skills required to operate the business.
  4. Cost and Risk Reduction: The franchisee often doesn’t need to make significant investments in research and development or brand building from scratch. Instead, they can leverage the proven successes in the market by the franchisor, minimizing business risks.

Franchisor Benefits:

  1. Market Expansion: Franchising allows the franchisor to expand into new markets and reach customers that they may not have been able to target on their own. The franchisor typically possesses knowledge and an existing distribution network, facilitating business scalability.
  2. Increased Sales Revenue: Through franchise agreements, the franchisor often receives franchise fees or a percentage of the sales revenue from the franchisee. This helps increase the franchisor’s revenue and profits without needing to invest heavily in day-to-day business operations.
  3. Rapid Scale-Up: Franchising enables the franchisor to quickly expand the scale of their business without significant investments in capital, time, and effort. The franchisor can capitalize on the rapid development of the franchise network to expand their operational reach.
  4. Risk Sharing: Franchising allows the franchisor to share business risks with the franchisee. If the franchisee is not successful, the franchisor doesn’t incur significant losses. However, if the franchisee succeeds, the franchisor also benefits from the growth of the franchise network.

In summary, franchise agreements bring benefits to both the franchisee and the franchisor. The franchisee can benefit from owning an established brand, gaining knowledge and support from the franchisor, while the franchisor can expand their market, increase sales revenue, and share business risks.

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