The COCO business model (Company Owned, Company Operated) offers businesses complete control over their operations, ensuring brand consistency and uniform customer experiences.
In this model, the franchisor owns and manages each location, overseeing every aspect from staffing to inventory.
This approach allows for strict adherence to the brand’s standards and simplifies decision-making, while minimizing the risks associated with external franchisee management.
Though it requires higher upfront investment, the Coco model is ideal for businesses aiming to maintain full operational control while scaling rapidly.
What is a COCO Business Model?
The abbreviation COCO, expands to “Company Owned Company Operated.” COCO refers to a business model in which the complete operation, ranging from ownership to day to day operations are managed by the parent company or the franchisor. In a COCO business model, the company not only acquires the ownership of the business but operates it directly. Unlike your typical business models where the independent entrepreneurs or the franchisees operated their individual units. In this sort of a business model, the company retains responsibility, control and dominance over both the operations and the ownership.
Even though the COCO business model does provide the company with a great level of consistency and control, it may also need significant capital investment and operational resources. Some companies utilize a amalgamation of franchisee owned units and COCO to attain a balance between the benefits of franchising including shared investment and accelerated growth and direct control.
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How does the COCO Business Model work?
The primary advantage of the COCO business model is its meticulous adherence to every lineated process, making sure there are no false commitments.
Consumers experience the brand firsthand via direct engagement with the company. Under the COCO business model, the brand owners are constantly delivering the same offerings across all the company branches.
Owners in the COCO business model are committed to steering clear of any sort of misleading promises, and preferring strict adherence to their service or product definitions and predefined operational models.
Unique Selling Point (USP) of COCO Franchise Model
The COCO business model is drawn out to ensure a consistent revenue stream which requires each unit to be self-sustained. The choice of geographical location becomes important with the premium locations often requiring high rents. In situations where the profits are difficult to attain, the brand must take a step in the operations of the business, as closure could harm its reputation.
Under the COCO business model, the units are generally operated by the staff that is trained at the brand’s headquarters. The brand is in charge of the infrastructure, hardware, interior design, furniture, operational costs, fixtures and renovation. The franchise partners in the COCO business model are primarily bothered with their investment, receiving guaranteed returns but holding no heed in the operations.
To expand into a variety of geographical locations, the COCO business model includes opening branches in various cities.
Key Features of a COCO Business Model
There exists some key features of a COCO Business Model, which provide its sense of uniqueness. Some of these features are listed below-
- Ownership by the Franchisor or Company- The parent company or the franchisor owns the business outright. This implies that the brand, assets and operations are under the direct ownership of the company.
- Direct Operations by the Franchisor or Company- The company operates and manages the business directly. This consists of responsibilities such as hiring and managing staff, overseeing day to day activities and implementing operational procedures.
- Brand Consistency- With the franchisor or company overseeing the operational procedures, there is generally a higher level of brand consistency across all the franchise units. Standardized procedures, customer experience and quality control are maintained by the company.
- Control Over Strategy and Decision Making- The company acquires full control over the strategic decision making, overall management strategies and business development. This enables a centralized approach to the decision making and implementation.
- Innovation and Testing- The COCO business model provides the company or the franchisor with a platform to test new services, procuts or strategies in a controlled environment. Innovations can be rolled out to all the other company owned units without the requirement for negotiations with individual franchisees.
- Brand Showcasing- All the company owned units often act as a showcase for the brand’s success. These franchise units depicts the company’s commitments to its business model and can influence the potential franchisees to join the arrangement.
- High Initial Investment by the Company or the Franchisor- The company is responsible for the initial investments and the ongoing operational costs and requirements of each franchise unit, which could be resource intensive. Although, it enables the company to acquire a consistent and direct influence on the brand’s representation.
Advantages of a COCO Model
Listed below are these benefits and advantages, which are enjoyed by the franchisor or the parent company, operating under the COCO business model-
- Brand Consistency- The COCO business model enables a high level of brand consistency as the company maintains direct control over all the aspects of the operational procedures. The standardized procedures, customer experience and quality control are consistently enforced.
- Exercising overall control over the operational procedures, the parent company or the franchisor can uphold the reputation and image of the brand.
- Operational Control- The franchisor or the parent company acquires full operational control, enabling quick decision making, the ability to adapt to market changes and the efficient implementation of strategies without requiring approval from independent franchisees.
- Innovation and Testing- The COCO franchise units serve as the testing grounds for new operational strategies, products and services. The company can innovate and experiment within its own franchise units before rolling out fruitful initiatives to the broader franchise network.
- The growth of the COCO franchises is facilitated by the parent company’s supervision of setup, site selection and management. This may lead to swift market penetration and growth.
- Brand Showcase- The company owned units often serve as a showcase for the brand’s success. These franchise units could be used to attract potential franchisees, which showcases the business model’s effectiveness and encourages others to join the arrangement.
- The COCO business model ensures the presence of a high quality and consistent customer service standards across all the franchise geographical locations, fostering the development of a distinctive and strong brand.
- Consolidated Marketing Efforts- Marketing efforts can be streamlined, consolidated and made hassle free under the direct control of the parent company. This makes sure that the marketing campaigns, messages, promotions are consistent across all the franchise units.
- COCO business models benefit from the through and comprehensive support and training that is provided by the parent company which leads to the inclusion of more knowledgeable and skilled franchise operators.
- Immediate Implementation of Changes- Changes in the branding, operations and marketing strategies can be included rapidly without the requirement for negotiations or approvals from the individual franchisees. This swiftness is specifically beneficial in briskly changing the markets.
- As the parent company shoulder all the financial and operational burdens and risks in a COCO business model, the franchisees experience a lesser exposure to the challenges and uncertainties associated with running a free and independent business.
- High Quality Training Programs- Training programs for staff could be standardized and consistently introduced in every franchise unit. The company makes sure that the employees receive high quality training to maintain a uniform level of service.
- Protecting Brand Integrity- The parent company acquires direct supervision in protecting the brand’s integrity. This may involve the enforcement of brand standards, swiftly addressing any issue or trouble that may arise and ensuring quality control.
- Profit Retention- Profits that are generated by the company owned units contribute to the company’s bottom line directly. There is no requirement of sharing profits with independent franchisees in the same way as a traditional franchise model.
- Control Over Geographical Location Selection- The company or the franchisor acquires overall control over site selection for new units, making sure that the strategic placements in key geographical locations or markets align with the complete business strategy.
- Operational Efficiency- The company or the franchisor can implement efficient operational procedures, benefitting from the centralized management, streamlined logistics and economies of scale.
COCO Business Model Ownership
Within a COCO business model, the company solely owns and operates all of the franchise units or outlets instead of relying upon individual free franchisees. The COCO model acts as a contrast to the traditional franchise arrangement wherein the company issues licenses to entities or individuals or franchisees to manage their operations, utilizing the company’s services, products, business model and brand name.
The ownership and operations within a COCO business model are distributed in the following arrangement-
- Ownership- The ownership of all the franchise outlets or units is retained by the company. This implies that the company manages and controls all the operations of each unit location directly.
- Operations- The responsibility of operations and management, directly falls on the company in each franchise unit or outlet. This arrangement enables the company to acquire more hold over the customer experience, consistency of operations and adherence to brand standards.
The COCO business model proves to be beneficial for the companies that want to conserve their brand image, product quality, ensure consistent service and have a direct control over the day to day operations.
But the ownership and maintenance of a COCO business model also requires hefty investments and significant operational resources on the part of the company.
It is key to understand that the franchise landscape is highly variable and the companies might adopt different business models solely based upon their industry, business strategies, service, products and other factors.
Marketing Activities in a COCO Model
In a COCO business model, marketing activities prove to be extremely crucial for a company’s expansion, promotion of services or products, increasing consumer engagements and creating brand awareness. Listed below are some of the most common marketing strategies that are associated with a COCO business model-
- Brand Building
- Advertising
- Promotions and Discounts
- Public Relations (PR)
- In-Store Marketing
- Customer Relationship Management (CRM)
- Market Research
- Online Presence
- Event Marketing
- Partnerships and Collaborations
The marketing or promotional activities in a COCO business model are supposed to be in alignment with the complete target market, industry, business strategy, and brand positioning. The aim is to generate a thorough and cohesive marketing plan that will efficiently promote the company’s services or products, drive in customers and enhance its competitive edge in the industry.
COCO Franchise Model Cost
The cost of maintaining a COCO business model can prove to be variable on the basis of some factors including, scale of operations, industry, geographical location and some specific requirements of the franchise units or outlets and business.
Listed below are some of the crucial cost considerations that are associated with the establishment and maintenance of a COCO business model-
- Initial Investment
- Acquirement or Building of Physical Locations (stores, facilities or outlets)
- Interior Design
- Set up
- Purchase/Lease (equipment, fixtures or furniture)
- Operating Expenses
- Employee Salaries
- Employee Benefits
- Utilities
- Rent
- Maintenance
- Inventory
- Supply Chain
- Advertising and Marketing
- Advertisement or Promotional Campaigns
- Online Marketing Activities
- Offline Marketing Activities
- Systems and Technology
- Technology for Inventory Management
- Implementation of Point of Sale (POS) Systems
- Technology for Customer Relationship Management (CRM)
- Other Operational Needs
- Training and Development
- Training Programs for Employees
- Ongoing Development Initiatives to keep employees updated regarding the product knowledge.
- Ongoing Development Initiatives to keep employees updated regarding the customer service.
- Permits and Licensing
- Necessary Permits and Licenses for Operations in Specific Geographical Locations
- Legal and Compliance
- Legal Fees for Drafting Agreements and Contract
- Legal Fees for Ensuring Compliance with Regulations
- Cost associated with Insurance and Risk Management
- Quality Control
- Implementation of Systems for Quality Control and Assurance Regarding Maintenance of Consistent Standards Across All Franchise Units
- Research and Development
- Improvement and Development of Services and Products.
- Customer Service
- Customer Service Operations
- Addressing Consumer Concerns
- Technology Infrastructure
- Building a Necessary Technology Infrastructure, to Support Communications and Operations.
- Reserves and Contingency
- Reserving Funds for Future Expenses.
- Reserving Funds for Economic Downturns
It is vital to keep in mind that the specific costs associated with a COCO business model are highly variable, on the basis of industry or the nature of business.
Also, the ongoing operational costs like utilities, marketing expenses and employee salaries must also be considered before investing in a COCO business model.
We encourage the businesses to conduct a comprehensive and detailed financial analysis and budgeting process to evaluate and plan for sustainable operations.
Profit Sharing in a COCO Business Model
In a COCO business model, profit sharing is generally the distribution of profits among the stakeholders. The stakeholders in this case are the primary owners or shareholders of the company. Profit Sharing in a COCO business model is highly variable on the basis of the company’s agreements, business structure and policies. Listed below are some of the crucial factors to keep in mind-
- Ownership Structure- The profit sharing might depend on the ownership structure if multiple stakeholders or owners are present. The distribution of profits will then depend upon the percentage of ownership each person acquires.
- Dividend Payments- Dividends here are a part of the company’s earnings that are distributed amongst the shareholders. Hence, the profits in a COCO business model dispensed off through dividend payments to the stakeholders.
- Retained Earnings- Retained earnings refer to the retainment of a specific portion of the profits to reinvest the sum in the business. This might be done to strengthen the company’s financial position or due to research and development or to fund future expansion.
- Incentives and Bonuses- Incentive or bonus programs may be implemented for management or key employees, solely based on the company’s profitability. These might include performance based bonuses that are tied to achieving some financial goals.
- Profit Sharing Plans- While this is more common in publicly traded companies or employee owned, some COCO businesses might assign a part of the profits to be shared with the employees.
- Performance Metrics- The profit sharing sums might be associated with particular performance metrics, including maintaining profit margins, achieving revenue targets or other financial goals.
- Contracts and Agreements- Specific contracts or agreements are issued between the shareholders or the company’s owners, outlining the details of profit-sharing arrangements. The contracts set out the distribution arrangement of profits and any criteria or conditions that are required to be met.
It is crucial for companies that operate under the COCO business model to acquire a transparent communication system regarding the profit sharing arrangements. This aids in the alignment of the interests of stakeholders and gives out a framework for the distribution of profits among the shareholders in a fair manner.
Role of a Franchise Agreement in a COCO Franchise Model
A franchise agreement is a legal document that delineates the terms and conditions, under which a franchisee is supposed to operate a business, utilizing the franchisor’s products, services and brand.
But in a COCO business model, wherein the company itself operates and owns the franchise units or outlets, the above mentioned traditional franchise agreement may not be applicable in the same manner. Instead, the COCO business model operates under the internal policies and operational guidelines to maintain control, consistency and standardization across the company owned franchise units or outlets. The focus is solely on the alignment of operations with the overall brand strategy, to ensure a unified customer experience across all the geographical locations.
Afterword
The Coco franchise model is a powerful strategy for businesses looking to expand while retaining full control over their brand and operations. Although it demands higher investment and oversight, the long-term benefits of consistent customer experiences, streamlined management, and enhanced scalability make it a valuable choice for many companies. As the franchise landscape evolves, the Coco model remains a reliable path for brands seeking sustainable growth and success.