What makes a successful franchise
Franchising is, without doubt, the most “public” of business formats. You recognize a franchise because it carries a strong brand, has a distribution mechanism that reaches far and wide and provides a uniform product, service and image to the public. Unlike license or distribution franchises who grant a “distribution” license that give the “right” to a product but don’t necessarily give the full-on business format, the true franchise is one that gives the right to an individual to use its trademark but also gives him/her the complete business blueprint, training in all aspects of running the business and on-going support.
Understanding the Franchise Philosophy
The “franchisor” or person, who starts a company or develops a concept, uses others (franchisees) to duplicate his concept and distribute it on a large scale. This inter-dependency forms the basis to the business format and its success lies in the effective implementation of certain basic but clearly defined business principles. The juxtaposed relationship between franchisor and franchisee needs to be fully understood and accepted for the overall business to succeed.
Franchising starts with a Good Idea
Franchising is often referred to as the stone that is thrown that causes the ripple effect of a great idea and a great franchise concept. An individual entrepreneur or company starts a business, runs it successfully for a reasonable length of time, has an unprecedented interest in the product or service, and decides to duplicate his successful concept. Once he has piloted the concept and proved its viability, he is free to grant licenses to others (franchisees) to trade under his trademark under the regulations and controls relating to the operation of the business in return for fees.
The Difference that is Franchising
Franchising is often referred to as the “innovator of new business” as it is the one business system that introduces novel concepts and patents new products. Any business, which is run under a management structure, can be franchised. However, not all franchised businesses will succeed. There has to be a demand for the product or service and the concept must be proved in practice to be successful.
Duplication the key to success
By duplicating a good product or service, a franchise concept reaches out to thousands of people who feel comfortable and safe buying their product or using their service. The trust that consumers place in franchise brands that have proved their success with multiple stores is important as it not only gives comfort to those using the products and services, but it also puts pressure on the franchise brand to continually maintain high standards and innovate in order to keep their customers happy.
Tapping into a Successful Formula
Franchising is all about tapping into a business concept that has already proved itself, that has the infrastructure and that has already captured the market. Essentially all the franchisees have to do is invest in a business, follow the business format and put in the effort as an owner-operator. Many franchisors will however caution that running a franchise successfully requires exceptional commitment from franchisees and compliance to their particular franchise format is paramount to making a success of the business.
Understanding the challenges to franchising
The most obvious challenge lies in the acceptance of the franchise system itself. Although a franchisee becomes his own boss, he is contractually bound to adhere to the franchisor’s operational guidelines. The cost of buying into a franchise, with its structure of up-front fees and set up costs, is often very high and a franchisee is obliged to pay ongoing management service fees (royalties) for the duration of his contract period. Restrictions may also be placed on the franchisee’s ability to sell the franchise as the franchisor has a say on the proposed buyer’s suitability.
To protect, lobby, promote and develop ethical franchising across all sectors in South Africa with specific focus on transformation.
