How To Start Franchise Business- Models, License, Royalty, Profits

If you are already running a successful business then you must be aware of the franchise business. Some people start their business by taking franchises from any big brand. They also benefit a lot by doing this business because they do not have to make their new brand from it.

It is right to do this kind of business but those people cannot earn as much money in it as they can earn by making their brand and giving franchises to the people.

If your brand has very good popularity or you want to elaborate your brand’s services to more than one city or state to generate more profit without much hard work. Then, you can start selling business franchises for your business.

With the help of this article, Today we’ll tell you about How to Sell the Franchise of Your Business and earn profits from other cities as well.

In this article, we’ll try to sort out all your doubts regarding the franchise business such as: how to create a brand, the required license, and registration, whom to provide, franchise models, franchise marketing, etc. in detail.

So, Let’s dig into the process of understanding How to Start a Franchise Business.

How To Start Franchise Business - Types of Franchise Models

Table Of Contents

What is Franchise Business

It is a method of growing your own business in which the owner of the company sells the goods of his company to another person and that person is now allowed to sell the same goods by using the name and logo of the company.

The person who bought the franchise also earns profit from it and by this process, the company’s owner brand also becomes famous among the people. Through this process, the parent Company is expected to grow drastically very soon.

Now we’ll tell you how to create a franchise for your business. So let’s understand How to Get a Franchise of Your Own Business.

How to Start Franchise of Your Own Business

You don’t have to face difficulties to create a franchise of your business. For this, firstly you have to make your brand popular among the people so that more nearby people refer to your services or goods.

If you make your brand popular then people by themselves come to you to ask for your franchise. You just have to allow them to use your brand name with some essential agreements and you sell them the products and services made by you.

The person who bought your franchise will sell your goods to the common people using your name and logo. Whenever he is out of stock, he can only buy from you and sell the products owned by you only.

If the name of your brand is too popular, then you can also charge money from him for using your name. In this way, You generate profits by selling goods of your own and you also earn a name in the market on behalf of your company.

Now we’ll understand how to create an agreement for offering a franchise of your business.

How to Make a Franchise Business Agreement – Franchise Business Agreement

In the business of franchises, you need an agreement that follows certain norms and conditions regarding profits and illegal selling of other products apart from my business. You are not allowed to give the franchise of your company to anyone without any signed agreement.

A franchisee business agreement is a document, which includes certain rules for bearing a franchise for a franchiser. If franchise desires to start his business, then he has to accept all the terms and conditions written in it.

Only after the original document of a signed copy, a franchiser gives the franchise of his company to another person.

Why Is It Important to Keep This Franchise Agreement

Keeping this Franchise agreement is important because there are certain laws by the government of India which must be kept in mind before starting to sell franchises of your business:

The agreement of franchise is done under the contract act 1872 of the government of India. In this Law, Copyright and Trademark law acts are discussed.
Under the competition act of 2002, it is forbidden to influence the production, sale, supply, or control of your goods in the market.
If there is, a lack of your goods or the goods do not reach their franchise shop on time, then the franchise person can complain against the owner company under the consumer protection act.
When there is a foreign exchange of foreign assets between your business, then the foreign exchange management act, of 1999 will also be applicable within this franchise.
These are certain major laws that help you a lot in this business. With this, when your brand name starts getting spoiled, then you are allowed to take back your franchise from them without any warning.

Now, let’s understand the models that are used by you to grow your business.

What Is FOCO Model Franchise

FOCO model stands for Franchisee Owned Company Operated. In this model, the investors invest their money to get franchises and take goods for just selling purposes. They have no rights to operate this business, this thing is directly managed by the owner.

In this type of model, The running (Operational) cost is maintained by the brand. So, the franchisee gets a minimum percentage of revenue earned in return as a guarantee for further business growth.

In this type of model, you have to share the profit equally with the franchisee.

What Is the COCO Franchise Model

COCO model stands for Company Owned Company Operated. In this model, the money also belongs to the company and the running of the branch is also the company.

You get benefits from this model, when you open some of your branches in this model, later on, people come to you by themselves and take your franchisee which benefits you a lot.

What Is COFO Franchise Model

COFO Model stands for Company Owned Franchisee Operated. In this type of model, the company invests in its own company and the franchisee runs it according to his own. In this model, you just get your profit.

What Is FOFO Franchise Model

FOFO Model stands for Franchisee Owned Franchisee Operated. In this model, The company rents out the brand to the franchise for a specific non-refundable sum and a pre-agreed period.

Prices and merchandise are decided by the corporate. Though, the corporate provides some things like the FOCO model, say marketing in national media say print, and electronic.

But, this model franchise is the owner of the shop, so all the operational cost needs to be borne by the franchise itself. The franchisee must provide an assured of minimum guarantee or percentage share of revenue to the corporate.

How to Choose the Best Franchise Model for Your Business

You should give franchises for your business very thoughtfully. All models are good but you have to first understand your company.

You have to look for how much profit the franchisee gives you by the end of the year, else he will spoil the name of your company.

If you want that you should have full rights to it, then you can start with the FOCO model for it. In this, you will have all the rights over the franchises.

What Should Be the Fee of Your Franchisee

If your brand is too popular then you can keep at least Rs. 1,00,000 [$1299]. If your brand is not very common among the people then you can charge the minimum cost of Rs. 50,000/- [$599] as your fee amount.

You have to ask for this fee from investors before selling your business’s franchise to them.

How to Collect Franchise Royalty Fee from Franchisee

You keep the royalty for the Branch company according to the profit. You can also save at least 30% of the profit for this.

This will ensure that you will continue to get money according to the amount of money your franchise earns. This will not fill the franchise too much and you will also not have to face any loss due to this.

Registration & License for Franchise Business

For starting your Franchise Branch below given licenses and registrations are a must. When it comes to opening your own business or starting with a franchise you should always have these approved licenses.

Below given are the required registration & license details for your franchise business:

Current Account ( For Business Transactions).
Shop License (Gumasta License).
Msme Registration
Udyog Aadhar
Fssai License [Only for Food Business]

If you want to run your Franchise Business without any police hassle or any legal action, then you need to get all these licenses for this.

How to Open a Current Account for Franchise Business

To receive payment under your partnership business name you must have a current account. This account will help you to receive all types of payments directly into your partnership’s current bank account.

For getting a current account for your Franchise Business you will need a few necessary documents such as:

Partnership Deed.
PAN Card in the Name of the Partnership Firm.
Address Proof of the Partnership Firm.
Identity Proof of all Partners.
Partnership Registration Certificate. (if Registered Partnership)

If you have any of these documents available, then you can easily apply for your business current account in any nearby bank.

These are a few reliable global banks for opening partnership business current accounts:

SBI Bank
AXIS Bank
BOI Bank
ICICI Bank
HDFC Bank

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How to Get a Shop License for Franchise Business

To get a shop license for your franchise business you have to first select a location for selling your goods or services.

If you’re renting any market place then, you have to get a rental agreement where your Franchise business name should be mentioned.

Once you get that place, you have to get a banner for your Shop that has your business name and updated address on it.

A copy of your rental agreement and a photo of your franchise business with the banner is enough for getting a shop license.

To get a Shop (Gumasta) License, you have to first go to the official website of your state or you can simply visit the nearby office.
After that, you have to register your franchise business there.
After a few days of registering, your Franchise Gumasta license will be delivered to the registered address.

After reading this, you can apply to get a shop license for your Franchise business.

How to Get MSME Certificate for Franchise Business

To register your franchise business under govt. For policies and schemes, you have to register under MSME facilities. MSME stands for Micro, Small Medium, and Enterprises.

It is a type of enterprise managing government that helps you to get govt. facilities for entrepreneurs for starting their businesses.

It even provides loan schemes and benefits etc. To get your own MSME certificate for your franchise business you can go to the Website And apply for MSME certificate.

How to Get a Udyog Aadhaar Certificate for Franchise Business

To get a loan for your Franchise business from govt. You should first, register your business as Udyog Aadhaar Certified. It will help you to apply easily for any type of govt- loan scheme and get subsidies in the form of bank loans.

To get a udyog aadhaar certificate for your franchise business you can log on to the Website And apply for the Udyog Aadhaar Certificate.

How to Get FSSAI Licence for Franchise Business

To start any type of edible business you must have a fssai license. FSSAI License Stands for the Food safety and standards authority of India. This license provides you the approval for the good of edible products sold by you.

FSSAI License is not required for businesses whose annual turnover is less than 12 lakhs or if their production capacity is less than 100 kgs per month. Such businesses only require an FSSAI Registration.

Vending edible goods without this license is a punishable offense. For starting any type of edible franchise business, this license is the first document that must be approved.

To get your franchise business FSSAI License you can simply log on to the website and start selling quality goods.

How to Market Franchise Business

Marketing a business is the most important thing to do in every business. If you market your business properly, then you get a lot of profit from it. If you want to advertise your franchise business, you have two ways to do this:

First of all, you have to contact your nearby shopkeepers and tell them that you have started a business nearby. If they need they can contact you at your number.
You can also provide them with some samples (if possible). You have to reach all the nearby shopkeepers and contact them.

Once you get in touch with the shopkeepers, they will buy goods from your shop.

Apart from this, You can list yourself on a website like Indiamart, Alibaba, eBay, etc. to start your business online.
After that people will come to you by themselves, to buy stuffs from you.

You can also create your Business Facebook page to do online marketing. Where you can post the best photos of your business samples and put them on your page. You can also market your business on Instagram.

You can get a lot of benefits in marketing from Instagram. Because more than half of the world’s population is using Instagram. For this, you have to first create an Instagram account for your business.

After this, you can market your business by sharing your business’s photo.

To do offline marketing, you can get some posters and banners related to your business. So that the people of your local can know that you started a business in the area.

Hoping, you have completely read the article about How to Create Franchise Business.

If you liked the information given by us, do tell us. if you have any queries in your mind, you can freely ask us by commenting below.