Franchising — How McDonald's And KFC Have Leveraged This Business Model To Become Multinational Companies

Photo by Nattanan23 on Pixabay

This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investing advice.

The COVID-19 pandemic has been challenging for many industries, but data shows the franchise industry is flourishing. In 2020, the franchise industry was worth more than $670 billion and employed more than 7 million people.

What Is A Franchise?

A franchise is a business concept where the owner of a business idea — the franchisor — licenses another business — the franchisee — to use its business idea and model, products, services, and branding. In exchange, the franchisor is paid an initial startup fee and ongoing royalties that usually are paid weekly, monthly or quarterly.

According to Statistica, the leading company in the franchise space in terms of market revenue is McDonald's Corp. MCD, which brings $93 billion. Following McDonald's is 7-Eleven Inc., collecting $90 billion in sales. Other franchises include KFC, owned by Yum! Brands Inc. YUM, Restaurant Brands International Inc.’s QSR Burger King, and Pokemoto, a subsidiary of Muscle Maker Inc. GRIL.

Why Franchising?

As the economy recovers from a nearly three-year slump, more people, especially those who lost their jobs, are following their entrepreneurial dreams in case a similar situation happens in the future. 

Franchising can help eliminate some fears that creep in when launching a new business. A big benefit of franchising is that the franchisor has access to a popular company’s brand name and everything that name includes, such as marketing the brand to potential customers, systems, distribution, recipe development, operational standards, etc. - all potential challenges when opening a new food service business.

From the franchisor’s standpoint, franchising offers a wide range of advantages. The initial start-up fee means an increase in cash flow for the business, and the ongoing royalties bring in continuous cash flow and profits. 

A report from The Value of Franchising says franchise brands drive 1.8 times more sales than non franchise businesses, provide more than twice as many jobs as offered by non-franchise brands and provide their employees with better wages and benefits.

Pokemoto is one example of a brand leveraging the franchise business concept to expand its reach into new cities across the U.S. The company has grown from 13 locations to 19 stores in just a couple of months after being acquired by Muscle Maker, Inc. In December, Pokemoto signed four new franchise agreements in Connecticut. The agreement brings its total store count in Connecticut to 14 and has become one of the largest, if not the largest, Poke concepts in the state.

The brand has now inked 31 franchise agreements over the last few months. Once the locations open, along with opening several company-owned locations, the brand will be in 52 total locations, an increase of 300%  since its acquisition. According to Muscle Maker CEO Mike Roper, the brand’s goal is to capture the biggest share of the $1.2 billion poke market.

To accelerate its expansion efforts, Pokemoto has expanded its internal sales group with 4 new sales people and recently partnered with franchise consulting and expansion firm Franserve, which has a team of more than 600 franchise consultants.

This post contains sponsored advertising content. This content is for informational purposes only and is not intended to be investing advice.