The franchising method has turned out to be one of the best ways to grow brand presence in many regions in the modern world while reducing the effects of operational risks. One of the most common adopted franchise strategies is the FOFO (Franchise Owned, Franchise Operated) strategy. This model enables business people to rent a chain and operate it in their capacity under a brand, thus providing local entrepreneurship with the advantages of an existing infrastructure.

In a FOFO configuration, the franchisee is liable for owning, operating and managing the franchise unit. Although the franchisor maintains support in the form of instruction and brand promotion, the franchisee is primarily responsible for running the business – as such, this model is suited to people who wish to control a business with minimal outside interference. This, together with the possibility of supporting a brand, has made FOFO a common preference among people in search of such entrepreneurial slope opportunities.

In this blog, we will explore the defining factors, benefits, and other details of the FOFO business strategy so that potential franchisees will be able to see whether it is appropriate for them.

 

What is a FOFO Business Model?

The abbreviation FOFO, expands to “Franchise Owned Franchise Operated.” FOFO refers to a unique business model in the franchising industry, in which the owner or the franchisee of a specific franchise unit is also in charge of the day to day operations of the same franchise unit. In simpler words, the franchisee acquires both the ownership of the business and the responsibility of running its daily operations and activities. 

Speaking of a traditional franchise model, the franchisor (corporate) provides the franchisee the lawful right to make use of its trademark, business model and brand name in exchange of capital fees, royalties and proper adherence to some specific guidelines and standards. Here, the franchisor is obliged to provide support, ongoing assistance and training to the franchisee whenever necessary, and the franchisee is obliged to pay the initial investment. 

The FOCO or “Franchise Owned Company Operated” business model, where the franchisee only acquires the ownership of the unit but the day to day operations are facilitated by the franchisor or representatives is in contrast with the FOFO model, wherein the franchisee also takes on the day to day operations of the business.

The choice of these models depend on a variety of factors including the industry, franchise concept and the preferences of both the franchisee and the franchisor. These operational responsibilities and ownership can differ significantly among franchises, with specific terms and conditions, which are typically detailed in the franchise agreement signed off between the franchisor and the franchisee.

 

Key Features of a FOFO  Model

There exists some key features of a FOFO Business Model, which provide its sense of uniqueness. Some of these features are listed below-

• Training and Assistance- Often some operating standards, training and extending assistance is provided by the franchisor to the franchisee to ensure successful management and smooth maintenance of the company. Other services including marketing and supply chain etc may also be provided by the franchisor.
• Marketing Support- To enhance brand awareness and consumer traffic, some marketing and advertising strategies and activities may be instilled by the franchisor, which is of great benefit to the franchisee.
• Ownership and Autonomy- FOFO business models are free to operate, own and manage their business independently, with necessary support and resources from the brand. 
• Risk Reduction- The FOFO model instills a feeling of steadiness or assurance by reducing the risks that come with establishing your very own company from the ground. Franchisees are also open to benefit from the other franchisees’ network along with the franchisor’s network. 
• Brand Recognition- FOFO model receives a reliable and trustworthy customer base along with expertise from a renowned and well-established brand with a history of successful performance. This without a doubt shortens the effort and time which is taken up in establishing a customer base and building market trust alongside a brand name. 

 

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Advantages of a FOFO Model

Establishing a FOFO business model is accompanied by various benefits, including-

• A FOFO business model provides a spectrum of possibilities. 
• Budding entrepreneurs can commence their careers from a FOFO business model and reach greater heights and achievements swiftly. 
• A FOFO business model reduces the risks accompanied with establishing a new business by utilizing a proven business plan and brand.
• Cost savings for the franchise may also be enhanced by utilizing the franchise networks to negotiate better supplier prices. 
• Franchisees are provided extended support and assistance along with operational guidance and training by the franchisor, which proves to be beneficial for a franchisee with no prior business experience. 
• As the franchisor has already established and developed a variety of operational components, a FOFO business model allows the entrepreneurs to get their business up and running at a more swift rate. 
• While it is extremely difficult for a newly established company to acquire brand reliability and a trustworthy customer base, a FOFO business model is fast in attaining these through the access to a well established brand.
• Many franchises have already received hefty revenues alongside a fun working experience as they have the full freedom to manage and grow their business independently.

 

FOFO Franchise Model Ownership

Franchises operating under the FOFO business model have the complete freedom or autonomy to adhere or stick to their own code of conduct and manage their franchise unit’s day to day operations using their own playbook as a guide.

In the FOFO business model, the franchisee is provided a business playbook by the franchisor which serves as a valuable resource for the franchise’s daily operations. This playbook acts as the foundation and reference point for the franchise.

In the FOFO business model, the franchisee is given the complete responsibility for a variety of aspects including the establishment of the store and the recruitment of new employees. The franchisee gets to exercise 100% control and power over the daily operations of the franchise unit.

An important example is that of the company, Raymonds, which follows the FOFO business model. With this approach, Raymonds provides a playbook to each franchisee, to guide them regarding the commencement of the business.

The franchise owner takes complete responsibility of staff recruitment, daily operations, and setting up in accordance with the provided guidelines by the company.

 

Marketing Activities in a FOFO Model

Effective marketing is important for any sort of business to come in contact with consumers. In the FOFO business model, the franchisee is entrusted with managing all the aspects of their business including both marketing and promotions.

These tasks pose a significant burden on the franchisee, and independently implementing and managing the above mentioned activities can be a challenge without a doubt. Over time, this may lead to a decrease in the efficacy of their marketing and promotional efforts.

In the FOFO business model, to navigate the dynamic business landscape, an option is to list down the services of a company dedicated to handling all sorts of promotional and marketing activities. Given the requirement for robust marketing and promotional strategies to boost the brand presence. 

This approach enables the franchisee to focus on the daily operations of their franchise units.

 

FOFO Business Model Cost

The FOFO business models in company franchises demand regular monitoring to prevent the risks of operational discrepancies. The franchisees are required to get well acquainted with the daily expenses, as there exists a likelihood that bookkeeping and managing the operational costs could become challenging at various points.

Inadequacy or discrepancy in account management is prone to bringing not just financial liabilities but also legal consequences, that might implant the franchisor’s brand reputation and potentially cause a variety of issues.

To set up an efficient FOFO business model, it is necessary to maintain diligent record keeping that is consistently updated.

Choosing a FOFO business model demands significant responsibilities, which requires meticulous attention from the outset. 

Overlooking any of the single day events could result in a backlog of pending works. 

 

Profit Sharing in a FOFO Model

In a FOFO business model, there exists a practice of distributing a larger portion of the profits endured to the investors of the company. This model indeed proves to be advantageous for the franchisor, as it only boosts and encourages the investors to further their considerable investments of time and efforts, which results in substantial results from the franchises.

But the income generated in this sort of a franchise is generally not consistent and is contingent upon the franchise’s potency within its specific market to participate in profit sharing.

 

Role of a Franchise Agreement in a FOFO Model

In the FOFO business model, the franchise agreement plays an important and unique role in establishing the operational and legal frameworks. This detailed and comprehensive contract maps out the responsibilities, obligations, and rights of both the franchisee and the franchisor. It charts the pivotal details including geographical rights, franchise duration, training, support, operational specifications, royalty payments and fees.

The franchise agreement of each FOFO franchise outlet is a legally binding document. The franchise agreement ensures the adherence to the brand’s terms and conditions, and the brand’s standards, thereby upholding the name, reliability and the integrity of the franchise. 

The franchise agreement serves as the guiding pact that overlooks and governs the relationship between the franchisee and the franchisor of each franchise unit, individually. This provides the necessary structure for a fruitful and mutually benefitting partnership between the 2 parties, franchisee and the franchisor.

 

Afterword

The FOFO business model offers a unique blend of independence and support, making it an attractive option for entrepreneurs seeking to operate within an established brand framework while retaining full control of their business. By leveraging the franchisor’s expertise and resources, franchisees can navigate market challenges and enhance their chances of success. However, like any business venture, it requires careful consideration, commitment, and a deep understanding of the franchise’s operating systems. With the right approach, the FOFO model can be a rewarding pathway to entrepreneurship.