"Franchising works by combining the drive and energy of the
entrepreneur with the experience and expertise of the franchisor."
This wonderfully concise description of franchising
comes courtesy of a franchisor from Down Under: Jesters Franchising, purveyor
of Jesters Jaffle Pies (all-natural meat, vegetable, and fruit pies) with 50
units in New Zealand and Australia.
Worldwide, franchising is currently riding a wave of
global growth unparalleled in its history. And for the right kind of person,
franchise ownership can provide the perfect vehicle for achieving financial
success. That type of person thrives in a space somewhere between the Lone
Ranger and the Corporate Drone. In other words, franchising provides the
opportunity to be master of your own financial destiny, while enjoying the
support of an established organization and the resources it commands.
Statistics vary widely on the success/failure ratio of
franchised versus non-franchised startup businesses, but franchises invariably
come out on top. Rather than cluttering the page with numbers, let's apply
common sense: Comparing the payment of: (1) an up-front fee to buy into the
support, reputation, and track record of a franchise system with (2) the
research, development, and startup costs involved in creating your own,
independent business, the odds of survival clearly favor franchisees. As the
truism says, franchising is about being in business "for yourself, not by
yourself."
For those new to the franchise business model, the
notion of writing a large check at the outset (the franchise fee) and another
every week or month (the royalty) may seem strange, objectionable, or even a
deal-breaker. But those fees buy you security in the form of the experience and
expertise mentioned above--including a proven business model, a system to make
it work, the value of a recognized brand name, and a dedicated team of people
whose only job is to help you, the franchisee, to grow and succeed. Why?
Because every savvy franchisor knows one essential truth: the more each
franchisee succeeds, the more the brand succeeds. In the race to grow and
expand the brand, their money is riding on you.
Despite the definite advantages and benefits offered
by franchising, nothing is certain in business; success is neither automatic
nor guaranteed. Assuming a solid business model, a brand that sells, and proper
training and ongoing support from the franchisor, franchise ownership still
requires hard work, with results accomplished over time. Otherwise, everybody
would hop on board. Franchising is not for everybody.
Franchising, like anything, has its drawbacks. These
include lack of independence (no Lone Rangers, please), inflexibility
(franchisees must follow the system), and the risks associated with the brand's
overall performance. For instance, if some franchisees run a sloppy operation,
it reflects poorly on the entire brand; if one restaurant makes headlines for
customers falling ill, it can hurt sales nationwide for months or years.
What follows are some of the major reasons to consider
franchising. Remember, for both franchisee and franchisor, it's all about
fit--not only in financial goals, but in personality, style, and values.
Be your own boss
This ranks atop of the many good reasons to choose
franchising. The desire to control your own destiny, to build a business for
yourself and a legacy for your children, has always been a powerful motivator
in business and in life. If that's not enough on its own, further motivation is
provided by the never-ending cutbacks in corporate life, not only in job
security and benefits, but in pensions and health insurance for retirees.
Franchise ownership combines a sense of independence (within limits) with a greater
level of security.
Hard work is rewarded
There's nothing better for the entrepreneurial spirit
than being rewarded directly for their effort. That usually is not possible in
corporate life, where bonuses (if any) are based more on salary or employment
level than on individual merit or performance. Hard work may be its own reward,
but it's even better when the income directly reflects the output.
Proven business system
New ideas are great. They're what makes business and
the world go round. From new restaurants and retail stores to products and
services that make life easier, innovation is a key ingredient in success (as
is consistency). But, as noted above, new businesses are prone to failure, and
most new ideas take time to catch on. Franchising allows entrepreneurs to plug
into a proven, successful idea and operating system, and focus their efforts on
running the business, rather than on adjusting it in midstream. The wheel's
been invented, perfected, branded, and marketed. As a franchisee, it's time to
roll.
Training and Support
Franchisors want franchisees to succeed. In fact, they
need franchisees to succeed. That's why intensive training is included in the
franchise fee. It can take days or weeks, depending on the brand. Prior to
opening for business, franchisees are trained in all the brand's specifics,
from cash registers and point-of-sale systems to brand identity and culture,
sales and marketing, and everything and anything that makes that brand unique.
They also benefit from instruction in business, technical, financial, and management
skills.
After opening, any franchisor worth its salt will
provide not only ongoing technical training (new haircutting styles, new tax
rules, new equipment, new technologies, etc.), but also mentoring and career
growth opportunities for its franchisees. This can include resolving daily
problems, marketing more effectively, and hiring, training, and retaining
employees. Franchisees and their managers also benefit from business coaching
and training--lifetime skills that are transferable to any other franchise or
any other business.
Financing
To grow, franchisors must add new franchisees (but not
at a rate too rapid to support their existing ones). If a franchisor finds a
qualified candidate, it's in their own best interest to help get them on board.
Yet for a startup, financing a new business can prove difficult, even with the
weight of an established brand name and track record behind them. While few
franchisors offer direct financial help, many are glad to provide referrals to
known sources favorably disposed toward the brand, and thus more likely to view
the candidate in a favorable light.
Site selection
For retail concepts, finding the best site (or sites)
is do-or-die. Independent business owners often think they've located the
perfect site--only to discover they've overlooked a key detail that a more
experienced set of eyes would have spotted. Established franchisors have been
through the site selection process hundreds (or thousands) of times before, and
have access to extensive databases, demographic research data, and their own
years of experience. Many have in-house site selection and build-out
specialists, or work with national real estate consultants and local agents
experienced at finding the optimal sites for their franchisees.
Peer networking
Competitive pressures are fierce in any business.
Independent business owners can join local business associations or trade
groups to network and discuss common problems--but who knows more about your
business than someone who's also doing it? Peer support from fellow franchisees
is an invaluable benefit of franchising. Since each franchisee has an exclusive
territory, cooperation is not only possible, but is built into the franchising
business model through annual conferences, regional meetings, intranet sites,
and daily phone calls where franchisees can share tips, ask for help, and gain
from the experience of older franchisees.
Brands
You can spend months thinking up a clever name, logo,
signage, uniforms, and the exact look and feel you want to attract customers to
your new business--but you won't know if it's truly effective until you open
for business. But if you hang out a sign that says McDonald's, Dunkin' Donuts,
Subway, or Midas, everybody knows your name. Whether it's locals or strangers
passing through, you have a built-in clientele. As noted, franchisees pay,
sometimes dearly, for the right to use a brand name. But that investment is
quickly repaid, many times over. The power of a well-known brand? Priceless!
Marketing/advertising
One of the sometimes contentious hot spots in
franchising is the cooperative advertising fee, which can shave a couple of
percentage points off your top or bottom line each week or month. The payback
comes in the value of a national or international brand identity, national and
regional advertising campaigns, and online access to promotional materials that
can be personalized and tailored to your local market.
Bulk purchasing
Franchised businesses frequently have a pricing
advantage over independent, non-franchised competitors. Whether the brand sells
a product or a service, or is retail- or home-based, the greater the size of
the franchisor, the greater its bulk purchasing discounts and economies of
scale--which creates a competitive advantage for franchisees scrapping for
market share within their territory.
Exclusive Territories
Another thing your franchise fee buys you is the right
to an exclusive territory, designed to provide a sufficient number of the right
kind of customers for your investment to succeed. Franchisors generally are reluctant
to award territories too large for a franchisee to serve adequately (and
because they want to sell as many as they can, within reason), the smarter ones
will err on the side of awarding territories that give their franchisees the
best chance of success.
The Ownership Factor
Then there's the final advantage: pride of ownership.
Even within a franchise brand, units or territories owned by franchisees do
better than units run by corporate managers. Having a stake in the outcome of
the operation, knowing that you will be rewarded directly for your efforts
(versus pulling a salary), gives franchisees additional incentive to go that
extra mile every chance they get.
Yes, franchising has many built-in benefits and
advantages, but it's not for everybody. Some people thrive on the challenge of
being out there on their own, inventing a new wheel each day, making all their
own decisions, answering to no one but themselves (and their customers and
creditors). Others crave the structure, reduced responsibility, and perceived
security of a day job they can forget about as soon as they punch out or close
the door behind them. And others still thrive on the challenge of climbing the
corporate ladder, being an integral part of a team.
As with all things, priorities and values change,
depending on one's station in life. Age, marital status, parenthood, and more
can point a person in a new direction. What's yours?
There are many clichés in franchising--all of them
true. Let's wrap up with one more: "Making it on your own doesn't mean
making it by yourself."
By Eddy Goldberg
Reference: Franchising.com