Tag Archives: business

Franchise business model for your start-up

Reading Time: 4 minutes

Introduction

I have been constantly questioning myself, what are the prerequisites for an innovation-driven venture to become successful and scale rapidly. Well, I realize that the success of a start-up truly depends on the various components such as team, timing, idea, access to the resources, and many more. However, in this short article, I would like to explore the business model as the main element of a successful start-up. Specifically, we will delve deeper into the franchise business model and we will try to discover the advantages and disadvantages of the model in the modern era driven by technology.

General context

First and foremost it important to explore the franchise business model in depth before we are moving further with our exploration. Basically, in a franchise agreement, a franchisee pays royalty to a franchise provider to get access to working business models, know-how, or even trademarks[1]. The conditions of the agreement may differ according to a business context. For instance, some franchise providers require to pay separately for purchasing franchises on top of royalty. The franchises in different forms have been around for at least 5 centuries and I still find franchises increasingly relevant in our modern society.

Examples of franchises

When we think about the franchise, most frequently pictures of McDonald’s, KFC, or even Subway pop up in our brains. These humongous companies are the most successful examples of franchises with over $20 billion in revenue every year[2]. However, the usage of the franchise business model is not solely bound to the food industry. There are a plethora of franchises in the real estate, retail, travel, beauty industries. Century 21 company is an outstanding example of a successful real estate organization that provides franchises to the market. The annual revenue of the organization is nearly $1.5 billion[3]. Another example that is worth mentioning comes from the software industry, where Eazi company provides a “business in a box” solution that enables franchisees to create app development and website development business. The organization provides partners with the app building platform, training, and branding. Also, the partners are obliged to operate under the name of the Eazi company[ 4 ]. I have outlined only a small fraction of the all existent types of franchises, however, it was important to provide a small glimpse into current use cases of the model.

Franchise for a start-up?

Why to even bother with the franchise if there are plenty of other working business models for my start-up? It is crucial to separate two distinct standpoints and answer two questions. First, are you willing to start a company with minimum risks by adopting something that works already? Second – are looking for a business model that will accelerate your venture and that will help you scale?

In the first case scenario, purchasing the franchise has a plethora of advantages as well as disadvantages. First and foremost, a franchisee does not need comprehensive business expertise. Usually, when you purchase a franchise, a franchisor offers you support and training to educate you, help you to gain experience in the industry, and reduce risks. Secondly, when one buys a franchise, he gets brand recognition that has been already built. Thereby you receive access to the customer base which is very difficult to build when starting the business.[5].Finally, you are still your own boss. From another perspective, the initial investment into the franchise may be high. Also, in some agreements, you will be paying royalties additionally. Secondly, the franchisor limits your creativity, because your business cannot alter the business model that was presented to you by a franchisor. Finally, financial data is not private. All of the financial data is being shared with the franchisor.[5]

In the second case scenario, franchising your business to others brings a huge amount of opportunities. One of the main components of a successful start-up is scalability. Franchising helps to grow your business rapidly and cost-effectively [6]. Since you do not need to invest in hiring new people, renting a new place, exploring new markets. Also, it is easier from the management standpoint, because franchisees manage the business by themselves and they are highly motivated to make the business profitable. [6]. It is worth mentioning that brand recognition positively correlates with brand recognition since every franchise helps to grow your brand. On a different side, you should have a successful business in order to be able to sell the franchise. Franchising is not an investment solution, it is rather an option to scale your business and increase revenue[6]. Also, your brand awareness should be already established. Another concern, that may not be that obvious is consistency in offered products and services. In my view, it is difficult to preserve the high-level quality of service or products that are being offered by all parties in a franchise. Since I believe that some products or services may be slightly altered due to the preferences of a franchisee, thereby it may reduce quality.

Conclusion


As I mentioned in the beginning, the success of a start-up depends on numerous components and no one can guarantee to you that a certain business model will grant you success. However, if you are starting or growing your business, it is crucial to consider all possible solutions that will lead you to success. In the article, we touched upon franchise for your business and tried to uncover all pros and cons of the business model. So now you should be better familiarised with franchising and you are equipped with one more option to consider.

Sources:

  1. https://www.nexea.co/25-business-models-for-every-startup/
  2. https://www.statista.com/statistics/208917/revenue-of-the-mcdonalds-corporation-since-2005/
  3. https://www.owler.com/company/century21
  4. https://www.eazi-business.com/
  5. https://franchisebusinessreview.com/post/franchise-advantages-disadvantages/
  6. https://www.nibusinessinfo.co.uk/content/advantages-and-disadvantages-franchising-your-business
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Wikipedia Is Finally Asking Big Tech to Pay Up

Reading Time: 2 minutes

Wikipedia, the free encyclopedia has been used and praised for various groups, researchers, students and even tech behemoths. It has been used for free, even thought it powers many of The Big Four commercial technologies. Now, it can finally change.

Everyone knows tight partnership between Wikipedia and Google. One fuels another one with date and in exchange is winded up in search results. Other tech giants used its services as well. Many chatbots and virtual assistants such as Apple’s Siri or Amazon’s Alexa learn and use data from Wikipedia.

According to The Wired, some companies are generous enough to contribute in many donations once a while, on the other hand, there are also companies that create enormous projects based on Wikipedia data without even mentioning it to the Wikimedia board. The new project called Wikimedia Enterprise decided to finally recognize commercial users as a separate database.

Nowadays, companies hire a lot of people in order to build teams responsible for importing Wikipedia data, usually through “data dumps” happening every other week. They do it without any help from Wikipedia. This is going to change.

“They all have teams dedicated to Wikipedia management—big ones,” Becker said, adding that making the different content speak to each other required “a lot of low-level work—cleaning and managing—which is very expensive.”

That is why Wikimedia Enterprise was born. It offers kind of a premium version of the Wikipedia API, which can be used to extract data faster and in format of a choice. Wikimedia thinks that companies are going to love this function and they will eagerly pay for it, since they are already paying whole teams to clean and format data. Now, it can be done even faster and at the source.

What do you think about Enterprise? Should Wikipedia introduce more premium paid services for companies? Let me know in the comments.

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The Pareto principle

Reading Time: 2 minutes1dfa217dd226d88bf12c87f3e368d91f-640x351

20% of products used in food, form 80% fat. 20% of your neighbors provide 80% of the noise. 20% of employees in your office make 80% of all work. The 80/20 rule you’ll find anywhere.

In 1897, Italian economist by the name of Pareto estimated that 20% of British families own 80% of the money. He tested it on a rule green peas in your garden: 20% of pods give 80% of the total harvest. This pattern works under all circumstances and in all cases.

The Pareto principle can be stated as: any situation is always a minority that is more important and useful than others.

On practice:

20-percent

The Pareto principle (20% of efforts provide 80% of the results)
– For business: 20% of customers generate 80% of your income. They require your attention.
– For students: 20% of the pages of the textbook contains 80% of all necessary information. Focus on the 20% – and grasp the new book.
– For all that not all of our daily tasks are equally important. Of the ten cases that you have planned for today, there are two more important than the other eight.

We must learn to identify the 20% to start with them. If you do not focus on the 20%, you have wasted 80% of the time. We will never alter all things, but it can handle 20%. And do not kill for the remaining 80%. Ability to prioritize and not grasp it all at once – one of the most important qualities. At first, priorities can not be entirely accurate apart, but regular exercise this will power the emphasis will shift to the side of the main results, and not sprayed on trifles.

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