Franchising has been used by the business world for over a hundred years. In 1888, Matilda Harper laid down the foundation of business format franchising without even knowing that indeed she started a “ gold rush” so to speak among business entrepreneurs.
Despite its usage for over a hundred years, there is no stopping the acclaim that franchising is noted as the most successful way to business expansion and growth. Franchising is here to stay and will continue to attract business owners and people desiring to become entrepreneurs. So please do not wonder why you are attracted to franchising like the countless people I have discussed franchising as a route to getting into the business.
While you will see numerous successful franchisees, their foray into franchising is not without commitment and hard work. Franchising does not guarantee automatic profits. Franchising will still require tons of effort on your part. If this is so, why should one consider franchising?
The Brand
The franchisor has already built the brand and thus has developed market recognition. So when you open your branch, there is a market that can patronize your branch due to familiarity with the brand. Franchisors also have the commitment to continue growing the brand in various ways. Be it a multi-media presence or simply the establishment of more branches and other guerrilla-marketing tactics Franchise companies employ. Thus, establishing the brand is not only your responsibility in the local market but is a shared responsibility of many franchisees and most of all the franchisor.
The Learning Curve
When you start your own business, there are many experiments that you need to undertake. At times, these experiments can be costly but no business is exempt from this. Mistakes are done and a number of independent businesses fold up due to these business miss calculations or simply wrong reading of the market. In franchising, the franchisor has undergone all the learning curves, has committed business mistakes, and has turned them into opportunities for growth – that is why the franchisor now has successful branches operating. This is one of the reasons franchisee pay a franchise fee, a business system has been developed and the franchisee need not go through expensive learning curves.
Leverage in Numbers
Even if you are operating only a single branch as a franchisee, you still stand to benefit from the leverage of numbers in the franchise system. For suppliers alone, a franchisor uses the number of branches to negotiate for better prices and even longer credit terms. In the business world, it is always a play of numbers, the more branches you have the better position you will have. Leverage in numbers does not only come from better terms with suppliers, belonging to a franchise system will enable you to feel you belong to a family of franchisees that share the same challenges and look at the same opportunities. Meetings among franchisees are occasions I look forward to. These are times when franchisees discuss the same challenges and as a group develop ways to meet them. It is not also surprising that there are informal mentors that stand out. These mentors assist franchisees particularly the new ones meet the operational concerns of their branches.
Business System
Franchising becomes attractive due to the fact that franchisors allow franchisees to use a business system implemented in their company-owned store. Developing a business system is never a joke, it involves years of operation, time, and even tears for the franchisor. Since there is a business system, the franchisee follows the system for the branch to be successful. The most important is its operational and accounting systems. These enable the franchisee to operate with less hassle and can bring the branch to financial viability. We have of course seen concerns about how franchisees use business systems. One area of concern is franchisees’ refusal to provide franchisors the accounting reports. The reasons are varied but mainly they do not want franchisors to know how much they are making. We have seen franchisees that complain about not doing the numbers but refuse to give franchisors their P & L monthly. How can a franchisor understand the situation of the franchisee when the franchisor has no information to work with? In fully using the franchisor’s business system, there is a need for transparency. The franchise office should know the numbers so recommendations can be done to improve profitability.
Operational Support
The franchisor provides operations support and assistance to operating franchisees. You will not be alone to manage and operate your branch; there is a Big Brother who can assist you. Operational support is done in varied ways. Field Visits where employees of the franchisors go to your branches and make an assessment of your operational compliance. At times, this is frowned upon by franchisees; they see it as the franchisor “policing” its franchisees. On one hand, it is, but the more important aspect of checking on operational compliance is enabling the franchisor to check if the business system is followed. One should remember that the franchisee paid a fee to use the business system. Franchisors call a regular meeting of franchisees. We have seen franchisees complaining about frequent meetings but it is not better to have more meetings than none at all. When franchisors call meetings, this means they are concerned about the franchised branches and are doing ways and means to improve the system. Franchisors also implement training and re-training of the management team and franchised employees. The goal of all of these is really to improve the franchise system thus improving the franchised branches.
Research and Development
All business face challenges of keeping up with the market otherwise lose their share. This means research and development not only in products but also services and customer engagement strategies. This becomes a tall order for those independent business people due to its cost. In franchising, the franchisor does research and development for the entire system composed of many branches thus cost is spread out to the total number of branches. Doing a customized accounting system alone can be costly but we have seen many franchisors engaging IT companies to develop their customized system and usage and cost spread to all branches. Research and development are also facilitated since there are numerous branches that interface with different markets thus information on the needs of these markets is within the reach of the franchisor who develops strategies to meet their needs.
Thus the above are reasons why franchising continues to occupy a stellar position in the field of expansion and growth and the route to becoming an entrepreneur.
CHECK OUT more advice from Butz Bartolome:
Can Franchising Be Beneficial to An Overseas Filipino Worker? | Butz Bartolome
Tips on How To Strategically Boost Your Business Effortlessly | Butz Bartolome
CHECK OUT the Philippines’ top mentor Butz Bartolome as he discusses business matters and SHARE THIS STORY with entrepreneurs and aspiring entrepreneurs who need advice.
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