Monday, January 14, 2013

Franchise VS Self Managed Cybercafe which one can give you more income? Part 1: Franchise

In this post I want share with you, what are the odds that a Franchise (group) Cybercafe can be better than a Self Managed Cybercafe. I will let you know what are they, so that you can compare.



Cybercafe Franchise System
How they operate?

Definition

According to wiki's definition, "Franchise is the practice of using another firm's successful business model."
Which means, a proven successful business already exist, and they, the franchisor will provide "successful" training and advice to franchisee. Not only operational advice were given, supplier liability will also bear by the franchisor. Franchisee don't need to look for supplier and deal with them, anything that franchisee need, a ordering sheet will be submitted to the head quarters and they will dispatch the supplies to the franchisee. The franchisor represent a brand itself, therefore the marketing will be handled by franchisor. All the franchisee need to do is to operate the outlet according to their standards and requirements. Example of franchise are like, MacDonalds, Subway, KFC.


Therefore, the criteria of a franchise:
  • operation training and advice are given to the staffs
  • supplier investment and liability bear by franchisor
  • franchisee pays royalty fee for using the brand to the franchisor

In practice, a cybercafe group is also like a franchise, the first cybercafe was a successful one, and they decided to open another one and will provide training and technical support, network of people such as game publisher, hardware supplier, software dealer and many more so that the chain cybercafe can be successful as well.

The franchise system require the operator to pay the franchisor a fee, it's a one time fee for an outlet, and on top of that they will collect a percentage of gross profit of the outlet as a royalty fee.

What do owner get after paying the royalty fees?

Cybercafe who signed contract with them will have the following:
  • Training on how to become a cashier and give proper customer service.
  • Training given to handle technical problems.
  • If hardware/software encounter problem, a professional technician will go on site and solve the problem.
  • Hardware/software management system and process will be given.
  • Hardware supplier to handle hardware problems. 
  • Best practises to cut cost
  • Strategic alliance with other game publisher, furniture, hardware supplier, getting everything in a lower price.


What does cybercafe operator doesn't have when they pay the royalty fee:

  • Business operating license, the owner must have the consent from local municipal to open a cybercafe, where the franchisor is only providing the business modal, not the business application process. Franchisor have to focus on improving their standard of procedures so that they can yield more gains with lower operating cost.
  • Lower rental cost, the business location and outlet is solely operator's responsibility. 
  • The franchisor's brand, the operator must follow everything the franchisor advised as it's for getting the best outcome, rather than experimenting the market by the inexperienced  business owner. Operator are not allowed to act on their own, otherwise stated in the agreement. 

Who should go for the franchising?

Who? 

Business owner who doesn't have lots of knowledge on operating the cybercafe business or business network, or relatively none, but wants to spend their money on higher investment gains.

High investment gains?

Franchise has lower operating cost as they have strategic business partners to lower down the cost. Therefore, with lower cost, earning the same amount of revenue, the net profit is definitely higher compared to those inexperienced cybercafe owners manages. A cash flow comparison is provided at the end of this post.

Why?

  1. Because of a group of cybercafe collectively pool their technical resources, any technical problem arise will be discussed and handled by those experienced technician, and the rest of the technical will follow those who already solved the problem. 
  2. Not only it saves the newbie's time thinking about the solution, it also helps increase every technician's knowledge, and the amount of problem reported is more too.
  3. Due to the monthly expenses such as technical support is a high, it will make a big impact on net profit on the long run. However with a franchise technician, he can be traveling to different cybercafe without staying in a cybercafe doing nothing. 
  4. The bulk buying advantage, as a franchise group, the volume already existed, therefore they have the bargaining power. Imagine if a computer shop suddenly have a large quantity of orders, that worth the computer shop's 3 months sales. A discount can be given when there's a big volume ordering.
The next post is about the self managed cybercafe. It has a check list what he needs to be able to manage it independently.

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