An interesting article in the Telegraph this morning shows how big name supermarket brand Tesco is experimenting with the franchising model to expand their operations overseas.
The news article reports that the supermarket giant have been trialing a handful of franchised stores in South Korea.
The idea behind the franchise model is that an established company such as Tesco can quickly expand their branding and reach into new territories by sharing the cost of business setup with the franchisee (the individual outlet owner). The franchisee benefits by building their own business backed and supported by a powerful brand, with the franchisor typically receiving a percentage of revenue back as a franchise management fee.
Although noting that it is still in an experimental stage, Tesco’s Head of International, Philip Clark indicated that he was sure they would be taking the concept to other places also.
Likening it to a “…franchised McDonalds…”, Mr Clark described how impressed he was with the model. It may also help to belay the fears of local communities and small businesses which can feel threatened by large, modern retail outlets setting up shop nearby. A business based on a franchise model can provide new business options for existing entrepreneurs in the local community.
Big established brands such as Tesco recognising the benefits of franchising for expansion, highlights what a great channel for business development franchising really is. In providing a mutual win-win partnership with those eager to start up new business ventures, the future of franchising is looking bright.