5 Benefits of Franchising your Business
For franchisees the benefits of franchising are obvious - an established brand and concept, ongoing support, etc. But what does the franchisor get out of it?
1/ RAPID NATIONAL GROWTH
For businesses that experience finance, human resource and property restraints to achieving expansion, franchising can offer a solution by allowing franchisees to fund the expansion of premises, vehicles or whatever is necessary to grow the business. In return the franchisee is granted the privilege to use the intellectual property rights, knowledge and experience of the franchisor in a truly win-win philosophy.
The expansion and development of a managed business seldom exceeds the rapid growth of a successful franchised business simply because the franchisees provide access to more finance and capital investment to grow the business and remove the requirement to find a salaried manager for operation.
2/ INCREASED NATIONAL MARKET SHARE
National coverage can be achieved relatively quickly via franchising if the franchisor provides the necessary support services. As well as capturing market share this will boost the company's brand recognition.
It is important to maintain good service levels across the network and it is important for the franchisor to have the right, as custodian of the brand, to protect it from misuse within the network. Having a clear franchise agreement and operations manual avoids any ambiguity.
3/ HIGHER SERVICE LEVELS
Regional franchisees operating within their specific territories provide a personal touch to the customer or client which elevates it above company-owned and employee-managed outlets.
The franchisee is granted the rights to sell the products or offer the service under the specific terms and conditions. The service levels are usually monitored at regular franchisee reviews and through mystery shopping activities. The information received from these sources, plus customer or client feedback, can bring valuable knowledge and experience to promote success and knowledge within the business.
4/ SELF-FUNDING EXPANSION
Franchising should become self-funding as the initial costs of creating and providing the franchise - including the training, launch support, site selection, intellectual property rights and software licence - are recovered through the initial investment fees paid by the franchisees. Additionally, the investment requirement to open each operation, including lease, store fittings, vehicles and staff recruitment, is taken on directly by the franchisees.
The ongoing costs of providing support, marketing, sales, websites, promotional activities, products or services, ongoing communications and managing the franchise network will be met by an ongoing management service fee paid by the franchisee, usually as a percentage of the franchisee's turnover. It is important that the support services represent value for money to the franchisee both in the short and long-term success of the business.
The success of the franchise will ultimately be measured by the ongoing trading position of the company. In effect the franchisor is required to make its money on the ongoing products or services provided and not on the initial franchise package fee.
5/ INCENTIVISED MANAGEMENT
One of the strongest elements of the franchise system is the dedication and commitment created in the management element of each outlet - the franchisee - by the fact that they have personally spent the money, time and effort to start the business and they earn by its success alone. This commitment is unparalleled when compared to an employee-managed company-owned operation and there have been many situations where franchise operations have outperformed the in-house management unit.
The quality of a franchisee - their abilities, qualifications, skills and experience - will ultimately reflect on the success of the franchise, so taking the time initially to implement an efficient selection process is paramount.
Gordon Patterson (pictured above, right)'has built a reputation as one of the world's leading franchise consultants for over 23 years and in 2003 was recognised by the International Franchise Association.
Gary Rigby (pictured above, left)'has been in franchising for over 17 years as a Franchise/Operations Manager for a national brand and applies this experience as a Franchise Consultant with FDS.
Written by Gordon Patterson and Gary Rigby