Building a winning franchise

Till date, inestimable content has been written on franchising and its benefits. No doubt, people have acknowledged franchising as a successful business model, but still there are numerous big business brands that have kept them detached from franchising. Let us investigate into it.

By Pallavi Majha | May 18, 2010

Franchising, as we all know has proved to be a successful business model for expansion and growth. It is also a proven method for aspiring entrepreneurs to fulfill their long cherished dream of becoming a business owner. Despite the fact, there are various well known brands that are still not in favour of taking up the franchise route, and prefer to suffer losses than considering franchising. 

Reasons for not taking franchise route

Let us find out the

various justifications these brands are giving for not opting franchising:

Franchising not apt for large format stores: Brands running large format stores believe there is hardly any large-format retail model that runs on a franchisee network across the globe. Expansions on larger scale require fast decision-making, stable adjustment to changing requirements.

Franchising weakens the business model: Another reason the non-franchise companies give for not preferring franchising is that following a franchise route for expansion will dilute the business strategy, developed over the years.

Huge investments: These non-franchise brand owners also consider franchise model expensive. It requires lot of investments in terms of technologies, mechanism, and strategies. The training involved with the usage of these, requires huge investments, which is a costly affair from a franchising perspective.

Time constraints: Franchising is a time consuming business model and needs lot of patience. These days when businesses are growing at a tremendous pace, the profit outputs generated on franchise investments takes lot of time which is not acceptable. All these factors are best addressed through a business model based on company-owned stores then franchising.

Franchising preferred for small formats: All big companies believe that franchising is an excellent business mode for small format stores, as it is easy to manage and organise them via franchise route, However in case of large format stores company owned and company operated model are suitable.  

Despite the above mentioned reasons for not taking up franchise route for expansion by big brands, there are companies that are attributing their success to franchising. These companies believe that there are other best business models than franchising if a strategy is planned in advance before taking up the franchise route. However, the most preferred way forward would be to initially test the company owned model in order to understand the basics of the business model itself before considering franchising. Besides, if these steps are followed before taking up the franchise route, then success will follow soon.  

Plan your franchise right for success 

Franchising is a rewarding business model, provided you plan your franchise strategy right and after through research.   

Market research: Try to learn what your competitors have done that worked or that did not work, either by personally visiting different companies as a customer, or by watching their profit graphs during various promotions or sales operation.

Create a business model: It is always advisable to develop a business strategy which makes you stand out in the industry. Use the data collected during market research to do this. A franchise is successful for the reason that though it is similar to other businesses, but it offers multiple benefits, which sets it apart from others.

Funding advantage: Unlike funding an independent business, franchise can be easily financed through a bank loan, or grants from the Government or from individuals/entrepreneurs that support your industry because of its brand identity.

Plan the business right: The business plan should mention everything that separates you from competition, providing estimate of revenue potential and how the franchise is expected to operate. Send the copies of the plan to the funding sources.

Disclosure Document: Prepare a standard disclosure document (required by the Federal Trade Commission) and register (if necessary) with the state.

Documentation: Prepare documents for all the systems required to run the franchise and develop a training system complete with a written manual.

Promotional strategy: Develop a strong promotional strategy to market and develop the brand.

Search for efficient franchise partners: The franchisees are the life line of any franchise business. So the franchisor needs to pay special attention while looking for franchisees.   

After reading the above pointers, I am sure that all those big names of the business world who are not favouring franchising will definitely reconsider their business strategies. You never know, tomorrow we may see some popular business houses foraying in to the franchising world.  

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