FOFO Franchise model is used by many enterprises who want to minimize the operational expenditure for their outlet.
The model ensures that the companies can lease their operations to other franchises interested in taking over the business operations.
The original company provides the staff training and takes care of SOP audits to ensure the standards are followed as agreed.
Here the ownership will be with the venture, and if they find any other option, they will be ready to terminate the contract with the existing one and opt for the new one.
Many companies adopt the FOFO model in well-established markets where they have already existed and have received high ROI.
The model can be understood by an example of a Cafeteria running corporates and hospitals owned by any company, but a franchise operates them for a lease period.
Once the lease period is over, the bidding happens, and the company hires a new franchise.
What is FOFO Franchise Model?
FOFO Model allows franchisees to use the brand’s processes, trademarks, and names in their outlet.
The agreement mentions a non-refundable fee required to start a franchise, remains valid for a particular period, and, as per the terms of the agreement, needs to be renewed again.
The company checks out the cost of its offering, and the potential owner is responsible for bearing all costs of operating the store.
There are other expenses, too, like royalty fees which are a part of company profits and have to be paid in a pre-defined period to the company.
FOFO Business Model or Franchise Owned and Franchise Operated Model is one of the popular franchise models used in the market.
They are commonly found in Indian markets, and many brands have operated on them for decades.
The companies adopt the FOFO model for quick expansion of brand or business presence and for penetrating the unconquered market by taking help from local business people.
The company takes care of the staff training and sends them to oversee the business at the new franchise.
Product and business franchises, especially for QSR restaurants and GYM, opt for the FOFO business franchise model.
It is one of the common types of franchising. About 70% of the franchises opt for this model.
The long-term success of any franchise depends upon the practical adaptation of the company to the existing environment.
For the FOFO business model, the franchisee had to make great efforts and spend time to make all processes efficient, or else long-term success would not be certain for them.
Advantages of the FOFO Franchise Model
Below is the list of benefits related to the FOFO Business model:
- The model poses a lot of possibilities for new businesses; budding entrepreneurs can start their careers from this model and conquer new heights.
- Many companies and franchises have made huge revenues and also enjoy their work as they have the independence to operate as they want.
Disadvantages of FOFO Franchise Model
Check out a few drawbacks of the FOFO Business Model
- The failure percentage is relatively high with the FOFO model compared to others.
- Usually, the ROI for the FOFO franchise model is quite higher than the other models in a similar league.
FOFO Franchise Model Ownership
The franchises that operate under the FOFO business model allow them to follow their code of conduct and operate their daily operations as their guidebook.
Here the franchisor had to hand over the playbook for the business, which will be helpful for the franchise’s operation. The guide will always be the starting point for the franchise.
The FOFO model allows the franchise to take over everything from recruiting new employees to setting up the store.
The franchise has 100% of power and control over the business’s day-to-day operations.
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Marketing Activities in FOFO Franchise Model
Marketing activities are essential in any business reaching out to the customer. For the FOFO model, the franchisee had to handle all his business activities, including promotions and marketing.
This burdens the franchisee greatly, and if they manage independently, it will be a challenging experience. In the future, it will reduce the effectiveness of their promotional and marketing activities.
Hiring a company to do all the promotional and marketing activities for you can be one of the options to sustain in the ever-changing world for FOFO model companies.
As many brands need aggressive marketing to spread their word, it becomes difficult for franchises to handle daily outlet operations.
Profit-Sharing in FOFO Franchise Model
The FOFO model here shares higher profits with the investors. The model is quite beneficial for the franchisor to invest efforts and time to receive high profits from franchises.
The income is not steady in this kind of franchise and will depend upon the franchise’s effectiveness in the niche to share profits.
Running Expenditures in FOFO Business Model
The FOFO model for company franchises requires regular checking, and it can lead to many operational discrepancies.
They need to familiarize themselves with the daily expenses; it is more likely that bookkeeping and running expenses can go out of their hands.
Improper account management does cause a lot of financial liabilities, along with legal ones. It will affect the brand’s reputation for the franchisor and can lead to many problems too.
To be efficient in the business model, the FOFO franchise had to maintain strict records to be updated regularly.
Opting for a FOFO franchise is a big responsibility, so taking care of everything is very much required from the initial days; losing out on any single-day event can result in much pending work.
FOFO Model vs FOCO Model
The FOFO model differs from the FOCO model as the franchise invests its money and is responsible for the daily operation here.
In the FOCO model, the new franchisee only had to invest money and, after that, just enjoyed some of the profits.
The FOFO model here is the best as the franchise making is much more if compared to any other franchise model.
An example of the company Raymonds, which follows the FOFO franchise model, can be taken.
Here the playbook is provided to the franchisees by the company to know how to start the business, set up, staff recruitments, and day-to-day operations are always taken care of by the owner.
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FOFO Franchise Model – Conclusion
Opting for the FOFO franchise business model can be great for your business. Only if you like to work in a disciplined manner under a Companies supervision.
It is a lot of work on the part of the franchise, and they can only afford to lose interest as it will result in ineffectiveness.
For the franchisor, the FOFO model is followed by many companies and has been quite successful.
However, the business can vary from brand to brand. Some brands apply minimal interference, hence, they can hope for great ROI if a store succeeds.