Victor’s business success and boujee lifestyle had always fascinated Simisola, Mr Denodeh’s daughter.
One day, Simi called Victor to ask him how he built a successful franchise, and he replied, “I’m unavailable, Denodeh Simi. Come to my office tomorrow, let's talk.”
One day, Simi called Victor to ask him how he built a successful franchise, and he replied, “I’m unavailable, Denodeh Simi. Come to my office tomorrow, let's talk.”
The following day, she went to his office. And Victor explained his business journey to Simi.
Victor was unable to get a job after schooling and this pushed him to start Vic's Food - a canteen. Victor was big on delivering value to his customers.
Victor was unable to get a job after schooling and this pushed him to start Vic's Food - a canteen. Victor was big on delivering value to his customers.
The way he delivered, one would think he was a dispatch rider.
Ten years later, Vic's Food had 5 branches and was reporting decent profits. Victor was satisfied with his brand like a student expecting a carry-over in a course would be pleased with a C/D in the same course.
Ten years later, Vic's Food had 5 branches and was reporting decent profits. Victor was satisfied with his brand like a student expecting a carry-over in a course would be pleased with a C/D in the same course.
Vic's Food had grown to become a name that commanded respect in the country’s catering space. Everybody wanted to eat at Vic's Food.
Jack was a young businessman who wanted to start his own canteen but didn't have the needed PR.
Jack was a young businessman who wanted to start his own canteen but didn't have the needed PR.
One day, Jack said to Victor, “I have a business proposal for you. I have the money to start a restaurant but I don't have the credibility to operate one successfully. Let's have a franchise arrangement. I will open my restaurant in your name to attract customers and in return,
I will pay you a commission every month.”
Victor did not understand how franchises work. But Victor was smart so he called an expert to explain.
Victor did not understand how franchises work. But Victor was smart so he called an expert to explain.
The expert told him that this franchise arrangement means that Jack will use the name Vic's Food and Jack will also retain ownership of the restaurant. Jack simply wants to exploit the presence that Victor’s brand has built.
The expert explained that because whatever Jack does in his restaurant will affect the brand generally, Victor will need to provide some coaching on how to successfully run the business.
The expert added, "You, the owner of the brand in this arrangement will be called the ‘franchisor.’ Jack, who wants to run a business with your brand name will be called the ‘franchisee’.”
"Franchisee, Oh I see,” Victor said. So how do I get my payment?"
"Franchisee, Oh I see,” Victor said. So how do I get my payment?"
"Well, usually, Jack will pay you an amount called initial franchise payment before he is allowed to use your brand name. That’s not all.
He will pay you a certain percentage of the sales he makes from his restaurant to you as a commission and that commission is called ‘royalties’. That royalty will be paid every 3 months or 6 months, or any agreed duration."
“That's great,” Victor said. “Wait….So, he goes through the stress of running the branch and I will take commissions, just like that. Hope this awoof won’t cause stomach upset?”
The expert replied. “You are a funny man, remember he is making money with your brand name.
The expert replied. “You are a funny man, remember he is making money with your brand name.
Also, any time you make an advert or do anything to build your brand name, Jack benefits from your PR efforts.”
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"You see, Simisola, that's how I made my fortune. If you aspire then you can perspire like me too."
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"You see, Simisola, that's how I made my fortune. If you aspire then you can perspire like me too."
Franchising is a very common business model. Some of the most popular franchise businesses are KFC and McDonald's.
People pay royalties to run their fast food with these names. KFC doesn’t own many of the KFC’s branches.
People pay royalties to run their fast food with these names. KFC doesn’t own many of the KFC’s branches.
If it makes it easy to understand, see franchising as “renting” a brand name to do business.
Was this explanation simple and clear?
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