When you have made up your mind to jump into franchise business because of the several benefits it offers. New franchises UK comes with plenty of merits such as a perfectly successful business model, an established brand and the incentive of immediate income.
But there is a growing trend of joint venture franchising, which offers a better alternative to traditional franchising. For those of you who have any unique idea but lack the capital for a start-up can choose a joint venture franchise to kick-start their business.
What is a Joint Venture Franchise?
Despite the name suggesting the obvious, joint venture and franchise are not the same! The term simply indicates that the joint venture and the franchise owner have mutually agreed to work within a single legal contract. This legal contract agreement is known as a joint venture franchise, where a franchisee agrees to be a part of a joint venture corporation.
Why does a Franchisor Benefit from a Joint Venture Franchise Model?
More Control Over Business Operations
The reasons why a franchisor wishes to be a part of a joint venture are many, one of the main reasons is to exert more control over the business. The second reason is to show better commitment to the franchisee by utilizing their own resources to manage the franchise.
In a traditional franchise model for any type of franchise including low cost franchises, the franchisor will rely on the contractual agreements to exercise control over the franchisee. Such a control generally extends beyond the manner in which the franchisee runs the franchise especially food franchises UK.
The franchisor will control the franchisees’ access to working capital and goes all the way to keep the identities of the board of directors hidden from the franchisee. This model allows franchisors to adjust the risk and reward graph.
More Assistance and Support to the Franchisee
One of the benefits of a joint venture franchise is that it allows the franchisor is able to provide assistance and support to help the franchisee successfully run the unit. A joint venture franchise for brands such as coffee franchises and others allows the franchisor to inject more capital into the franchise if it falls into trouble.
The capital can be paid in the form of capital investment or royalty fee waiver. The equity shakeup, the franchisor is able to show the commitment and support that the franchisee needs.
Joint Venture Franchise: Strategy to Test a New Target Market
When a franchise is not large enough to enter a potential target market, then entering into a joint venture franchise agreement with a local firm is the best way to test the market. This strategy is particularly effective for international franchises looking to enter new markets in various countries.
This contractual agreement will help both the company and the franchisor to open a test home based franchises or any other part time franchises that require a minimum investment.
Joint venture franchising offers several benefits when done right. However, before entering into any contract with another company it’s essential for the franchisor to seek legal assistance from an experienced franchise attorney to avoid any legal loopholes.