Even though franchising per se is a sound business concept, there are good and bad franchises – and a prospective franchisee needs to discern the difference between the two.
Since choosing a franchise is a major decision, a prospect has to consider many factors before taking the final plunge. Initially, however, he should first list down his preferences, personality traits, and management style. He should go into a business that matches who he is, and how he runs things. He must also study the existing franchises in his area so he could decide if he wants to put up an additional outlet of a company that already has several franchises there or venture into a new one. Finally, he can start to consider the terms of each franchise.
It is necessary for any prospect to conduct a research on existing franchises of the brands he is considering to enquire about their problems, financial viability, and level of satisfaction with the franchise. The feedback that he will get will get can serve as a major gauge on the viability of the business.
A good franchise offers a total package that ranges from start-up assistance to post-opening support for a reasonable fee. There are several points to look for in a good franchise. The brand must be known to the prospect and must be have the potential to expand further. The track record of the franchisor must be good and the franchise fee is reasonable. The projected level of profitability must be supported by facts i.e. the net income of existing franchises, to have an assurance that the investment will be recouped within a reasonable period. Because the investment is lower than a non-franchise business, the Return on Investment should be significantly higher.
The franchisor must be seriously committed to the success of their franchises. The franchisor-franchisee relations should be strong. The existing franchisees should be satisfied with their business and the marketing programs that the central management implements. The organization must be structured in such a way that the roles of each unit are clear and well delineated. A highly organized company maintains an efficient system that maximizes the use of time, energy, and human resources to save money and thus boost profits. In a structured company, the problems in day-to-day operations are greatly reduced because everything is expected to run like clockwork.
The market research must be extensive enough to maintain and continuously strive to improve the profitability of all the franchises. Good franchisors are always on the lookout for potential opportunities to further improve existing strengths and address the problem areas strategically. They know how to respond to market changes quickly in order to stay ahead of other businesses.
The performance of each franchise is studied from time to time. The training that the franchisor provides must be sufficient for start-up operations and running the business, and projected for the long-term stay of employees. In addition, the support of the central management should be adequate to assist the franchisees in handling the problems that may be encountered in running their outlet. This shows that the franchisor is dedicated to maintaining the integrity of its brand in all aspects of the business. Continuous support from the franchisor also lessens the possibility of any of the franchises ruining the reputation of the brand.
Lastly, a good franchisor strictly adheres to all the terms of the franchise agreement. The products and services that are offered through the franchisor must be of high quality and are delivered promptly. This strengthens the relationship between the franchisor and its franchisees.
On the other hand, bad franchises are generally short on training, support, and expertise. More often, these are the lesser-known brands that have little to lose in the event the franchise is unsuccessful. They do not have an established track record to speak of and may therefore fall short on experience and expertise to help run a successful franchise. They may demand an unreasonably large amount as franchise fee to give the impression that they are as good as the more popular franchises and provide the same intensive training and support. Prospects need to be aware of unscrupulous people who may only be after making an instant profit easily by deceiving a prospect with promises of projected profits. Some companies may draw up a franchise agreement that is as good as that of bigger, more successful companies but due to their meagre resources and little or non-existent expertise, they may not be able to implement the agreed terms to the satisfaction of the franchisee. This is the very reason why conducting a research on existing franchises is very important.
A bad franchise promotes products and services that are seasonal. Prospects also have to stay clear of companies selling fake products such as those that manufacture and market imitations and pass these on as, for example, Class B originals. This is punishable by law.
Some companies, aware of the popularity of franchising, may take advantage of its attractiveness and offer franchises left and right, without regard for viability, and concerned only with selling as many franchises as possible.
In case a company is just starting out to franchise their brand, prospects need to be wary and take more time before committing. It may not necessarily be a bad franchise but nobody wants to be part of a test run.
Monday 4 June 2007
Saturday 26 May 2007
Franchising – The risk free solution to starting you own business?
Starting a business is tedious, expensive, and risky. It involves a lot of paperwork, market studies, coordinating with concerned agencies, scouting for the right place, and providing a significant amount of money for lease, initial inventory, furniture, and equipment.
However, nowadays, those thinking of starting a business have the option to start from scratch or simply get a franchise from reputable establishments. It is a fact that many success stories in business started from scratch and the vision of their founders. Starting from scratch is good if the business has something innovative to offer and can sell its products at a competitive and affordable price. It also must find the right business site, near its target market, and be able to advertise well in order to make consumers be aware of its products or services. This can take a long time, a lot of money, and uncertain market response.
On the other hand, considering the present aggressive competition in business, a franchise offers an enticing alternative. Franchising is a relatively new concept in business that caught the imagination of many business-minded people. In non-technical language, it simply means putting up a branch of a well-known company wherein the franchisee pays an agreed amount to the franchisor for the use of its brand name and identity. The franchise fee may vary according to the size of the franchisor’s customer base, popularity, and prospective profits. In addition, the franchisor offers its track record and effective business strategy. In the last few years, franchising became so popular that almost all successful companies have at least a few franchises. Many have even ventured into franchising overseas.
Despite the fact that big businesses demand a hefty sum of money as franchise fee, the benefits of franchising far outweigh its price. A good franchise offers a total package that includes site selection, lease negotiation, management and personnel training, and store design in addition to allowing the use of its trademark. It also provides continuing support on marketing, quality assurance, and troubleshooting to ensure that all franchises follow the same standards of quality. Hence, in retail outlets, processes are standardized, quality is assured, and customers are confident that they are getting their money’s worth.
Take the case of one of the most popular and successful franchises: McDonald’s. Today, McDonald’s franchise stores are everywhere, not only in the US but also in many countries abroad. When a customer walks into a McDonald’s outlet anywhere in the world, he can expect the same high quality of food and service.
This is because one of the most significant advantages of franchising is that the retail will have access to the knowledge and expertise that enabled the franchisor to develop and expand its business. Since each franchise will adopt the same strategy that eventually developed from such know-how, all of them share and maintain a solid business platform. Their standard operating procedures (e.g., product pricing, recruitment, and marketing) have already been tried and tested such that many of the early mistakes have already been detected and addressed. Hence, the risk of failing is greatly reduced compared to an entrepreneur who is just starting to establish a business independently.
If marketing and purchasing are centralized, they result in economies of scale, which means lower costs and presumably higher profits. Moreover, all franchise stores benefit from the aggressive and sustained advertising, marketing, and promotional programs handled by the main management. The franchisor's business plan, operations manuals, and market analysis are also readily available, as well as the exact figure needed to fund the new franchise.
Assuming that the franchise is maintained according to the terms of the contract, initial investment can be recouped within a considerably short period. On top of the other benefits of franchising, the prospect of recouping investment early should be an irresistible come-on to any enterprising person.
The arrangement is also beneficial to the franchisor since it is assured of profits even with the franchise fee alone. The management of all franchises is centralized but the responsibility for the hiring of personnel and the day-to-day operations of each outlet rests on the franchisee. This leaves the central management free to focus on marketing thrusts and product research.
The concept of franchising is important because it gives the franchisee a chance to go into business for himself while enjoying the support and customer base of a mother company. In this arrangement, a safety net is provided for the franchisee’s investment since a good franchisor will certainly want to ensure that its good name in the business is upheld and that the new franchise will be viable for the sake of both parties. Moreover, the concept does not require direct experience from the franchisee. Therefore, it opens up a lot of access to various types of business that he might not have otherwise considered.
Indeed, franchising has become an important concept in business because it has proven that starting a business need not be difficult and risky. In fact, with franchising, it can be a piece of cake.
However, nowadays, those thinking of starting a business have the option to start from scratch or simply get a franchise from reputable establishments. It is a fact that many success stories in business started from scratch and the vision of their founders. Starting from scratch is good if the business has something innovative to offer and can sell its products at a competitive and affordable price. It also must find the right business site, near its target market, and be able to advertise well in order to make consumers be aware of its products or services. This can take a long time, a lot of money, and uncertain market response.
On the other hand, considering the present aggressive competition in business, a franchise offers an enticing alternative. Franchising is a relatively new concept in business that caught the imagination of many business-minded people. In non-technical language, it simply means putting up a branch of a well-known company wherein the franchisee pays an agreed amount to the franchisor for the use of its brand name and identity. The franchise fee may vary according to the size of the franchisor’s customer base, popularity, and prospective profits. In addition, the franchisor offers its track record and effective business strategy. In the last few years, franchising became so popular that almost all successful companies have at least a few franchises. Many have even ventured into franchising overseas.
Despite the fact that big businesses demand a hefty sum of money as franchise fee, the benefits of franchising far outweigh its price. A good franchise offers a total package that includes site selection, lease negotiation, management and personnel training, and store design in addition to allowing the use of its trademark. It also provides continuing support on marketing, quality assurance, and troubleshooting to ensure that all franchises follow the same standards of quality. Hence, in retail outlets, processes are standardized, quality is assured, and customers are confident that they are getting their money’s worth.
Take the case of one of the most popular and successful franchises: McDonald’s. Today, McDonald’s franchise stores are everywhere, not only in the US but also in many countries abroad. When a customer walks into a McDonald’s outlet anywhere in the world, he can expect the same high quality of food and service.
This is because one of the most significant advantages of franchising is that the retail will have access to the knowledge and expertise that enabled the franchisor to develop and expand its business. Since each franchise will adopt the same strategy that eventually developed from such know-how, all of them share and maintain a solid business platform. Their standard operating procedures (e.g., product pricing, recruitment, and marketing) have already been tried and tested such that many of the early mistakes have already been detected and addressed. Hence, the risk of failing is greatly reduced compared to an entrepreneur who is just starting to establish a business independently.
If marketing and purchasing are centralized, they result in economies of scale, which means lower costs and presumably higher profits. Moreover, all franchise stores benefit from the aggressive and sustained advertising, marketing, and promotional programs handled by the main management. The franchisor's business plan, operations manuals, and market analysis are also readily available, as well as the exact figure needed to fund the new franchise.
Assuming that the franchise is maintained according to the terms of the contract, initial investment can be recouped within a considerably short period. On top of the other benefits of franchising, the prospect of recouping investment early should be an irresistible come-on to any enterprising person.
The arrangement is also beneficial to the franchisor since it is assured of profits even with the franchise fee alone. The management of all franchises is centralized but the responsibility for the hiring of personnel and the day-to-day operations of each outlet rests on the franchisee. This leaves the central management free to focus on marketing thrusts and product research.
The concept of franchising is important because it gives the franchisee a chance to go into business for himself while enjoying the support and customer base of a mother company. In this arrangement, a safety net is provided for the franchisee’s investment since a good franchisor will certainly want to ensure that its good name in the business is upheld and that the new franchise will be viable for the sake of both parties. Moreover, the concept does not require direct experience from the franchisee. Therefore, it opens up a lot of access to various types of business that he might not have otherwise considered.
Indeed, franchising has become an important concept in business because it has proven that starting a business need not be difficult and risky. In fact, with franchising, it can be a piece of cake.
Franchising – An opportunity for ex-service people
Having worked in the armed forces for years it can be difficult to know what to do regarding work once you have left. It is easy for some who have the necessary skills and contacts to go immediately into employment but for others there is a large gap between leaving and finding the right job.
Franchise Directory
Wednesday 23 May 2007
An introduction to me
After having had my head in the clouds for quite some time, having stared at and am still staring at a computer monitor since the invention of the Amstrad 1640, I am now starting to steer clear of all IT related matters that are no longer of interest to me. I have thrown out my coding manuals, deleted all compilers and am well on the way to cleansing my soul.
My new interest is franchising (decided against base jumping) and that's what my blog will be about. Maybe not always, maybe I will gripe a bit, but almost certainly mostly about franchising.
It's a huge leap from what I used to do, but there was a link at some point which made me jump the line. A good friend of mine from Adhive has been in this business a long time and after doing a little work for him the line was securely crossed. I now own, run, manage, promote, look after, dedicate my time too, play with, tweak (you get the message) a franchise advertising website. It's early days yet but with a lot of hard work it should be off the ground and running!
So... Here we are, my franchise blog. I hope you find the articles, news and gripes I submit here of some kind of interest.
Ta!
Enjoy.
My new interest is franchising (decided against base jumping) and that's what my blog will be about. Maybe not always, maybe I will gripe a bit, but almost certainly mostly about franchising.
It's a huge leap from what I used to do, but there was a link at some point which made me jump the line. A good friend of mine from Adhive has been in this business a long time and after doing a little work for him the line was securely crossed. I now own, run, manage, promote, look after, dedicate my time too, play with, tweak (you get the message) a franchise advertising website. It's early days yet but with a lot of hard work it should be off the ground and running!
So... Here we are, my franchise blog. I hope you find the articles, news and gripes I submit here of some kind of interest.
Ta!
Enjoy.
Subscribe to:
Posts (Atom)