The franchise business model offers a reliable way to set up and manage your own business with the benefit of additional support and security.
As a leading coffee franchise, we’ve refined our business model over the years, ensuring that each franchisee is set up for success. Here’s what you need to know about why the franchising model works so well.
What is Franchising?
The franchise business model works on the basic premise whereby an established brand or company gives an individual the rights to operate under their name, gaining access to the brand’s trademarks, products and customer loyalty, among other things.
Franchising creates a partnership between the franchisor and franchisee. Specific franchise models and agreements will vary between individual companies and industries, but most will centre around this relationship between the two parties.
The Advantages of the Franchise Business Model
The franchise model is a popular choice over building a business from scratch for several reasons.
Primarily, because the chances of success are much higher, along with the expectation that your business will turn a profit faster. When you invest in a franchise, you benefit from:
- Being part of an already established business – the hard work of gaining a brand presence and proven operational model has already been done for you.
- Embracing an existing customer base that already knows your name and loves your products.
- A better chance of financing.
- Ongoing support and market expertise you wouldn’t have if you were going it alone.
Read our more in-depth discussion of the advantages of franchising.
The Franchisor’s Role
The franchisor is the creator of the franchise and legally owns the brand. This means they are responsible for providing the franchisee with business operations and/or products to be sold under the brand’s name. In many franchise agreements, they will also provide:
- A PROVEN BUSINESS MODEL - IN THE UK, A FRANCHISE HAS TO PROVE ITSELF AS A ‘BUSINESS FORMAT FRANCHISE’ BY TESTING THEIR BUSINESS MODEL FOR A MINIMUM OF ONE YEAR, ACCORDING TO THE BRITISH FRANCHISE ASSOCIATION (BFA).
- BUSINESS STRATEGIES
- MARKETING TOOLS AND RESOURCES
- ANY TRAINING REQUIRED
In exchange for supplying this, the franchisor will receive a franchising fee and royalties from each franchisee and franchise outlet – it is a relationship that goes two ways, and with the success of one party comes the success of the other.
The Franchisee’s Role
The franchisee is in charge of the day-to-day running of the franchise store and keeps a large percentage of the profit. While they must adhere to the regulations and expectations set out in the franchise agreement, franchisees can run their business with a good level of freedom.
They will pay a fee for the permission to trade under the franchisor’s name and products. The franchisee will be responsible for paying a number of costs and fees during their agreement, including:
- FRANCHISE FEE – DEPENDING ON THE TYPE OF FRANCHISE, THIS CAN BE AN UPFRONT PAYMENT OR AN ONGOING ONE.
- WORKING CAPITAL
- START-UP COSTS
- ROYALTIES - USUALLY, THE ROYALTIES PAID TO THE FRANCHISOR WILL BE A PERCENTAGE OF WEEKLY OR MONTHLY GROSS SALES AS SPECIFIED IN THE FRANCHISE AGREEMENT.
Types of Franchise Business Models
The franchise model can be adapted to suit most industries. There are three main business models you may choose to invest in: product, business and manufacturing.
Product
A product franchise is when the franchisor permits the franchisee to distribute a product which is branded with the franchise logo, name and trademark.
Manufacturing
Here, the franchisee is authorised to manufacture the franchisor's products then sell them using the name, logo, and trademark of the franchise.
Business
The most popular model is a business franchise. A franchisee is licensed with the rights to manage a business under the franchise brand, following the franchisor's systems and processes.
Esquires Coffee uses the business franchise model as our franchisees are able to operate under the Esquires name, providing customers with our products and delicious coffee.
Types of Franchise Agreements & Ownership
There are several franchise agreements you can make, depending on the scale of the business you want to run.
Single-Store Franchise Agreements
If you’re new to franchising, this is where you’ll start. A single-store franchise agreement gives you the ability to operate from one location or store.
With a single-store agreement, there is the option to act as an investor or to have a more hands-on experience and take on a management role.
Multi-Store Franchise Agreements
With a multi-store franchise agreement, the franchisee has the right to open more than one store. This type of arrangement allows the franchisee to build upon the success of their single store and expand to other areas.
Again, the franchisee can act like an investor or actively oversee the management of the multiple stores.
Regional/Master Franchise Agreements
A regional or master franchise licence agreement means that the franchisee is authorised to open multiple stores in a specific area and manage said area. This could be an area specified by the franchisor, a county or a region.
As a regional developer, you have the authority to open multiple stores and be given exclusivity for the area. Alternatively, you can also become a sub franchisor to individual franchisees.
The role of the regional developer can be slightly different from that of a single-store franchisee. Instead of just being involved in the day-to-day, they are also required to sell franchises and work as operational support for the local stores.
It will be down to them, with the franchisor's guidance, to support the opening and growing of local sub franchises.
Please note that we are now only offering master franchise licences in Scotland. So, if you’re interested in a regional franchise, or indeed a single or multi-store licence, for this region, please get in touch!
Franchising With Esquires Coffee
The coffee shop industry has seen impressive growth over the past few decades and offers some exciting opportunities for entrepreneurs. With the popularity of cafes and coffee shops, there also comes high competition. Investing in a franchise helps you get two feet firmly through the door, making your chances of success more certain.
If you want to combine a passion for coffee with business experience and enthusiasm, an Esquires franchise provides the perfect route. You can find out more about us and how we do things over on our franchise FAQs page.
Or, if you’re ready to get started, you can apply for an Esquires Coffee franchise below and our team will be in touch.
