Why does a franchisor franchise?

July 23, 2018

Good question: why does a franchisor franchise, rather than expand through their own outlets, employing their own staff?

 

I have thought about this several times before, in previous lives, deciding on which is the best route to expand a brand and business. Having been in the franchise industry for nearly 30 years now, I suppose franchising is in my blood and believe it's a great way to expand.

 

There is no one concrete answer that fits all businesses. It is actually quite a complex, multi-faceted answer that has priorities and reasons in different guises for different businesses.

 

So, let’s take a few of these in turn…

 

Speed of brand expansion:

The rate of expansion will probably be quicker through a franchised model, than an internal investment model. Once the franchise has been established, a franchisor can launch multiple businesses, over a considerable geography, simultaneously. The key word here is “established”. I don’t mean 3 or 4 franchised outlets having previously been launched; I mean multiples of ten.

 

It is imperative, if a franchisor is going to do things correctly, that there is a stepped proven process for franchisees to follow. Get that right though and it is a great route to expand quickly, properly and consistently.

 

Finance:

How much would it have cost McDonald’s, Starbucks, Dyno-Rod or Dunkin’ Donuts to get to the size that they are now, without a franchised model? The answer is they probably would have not have tried in the first place, or would have never got there.

A franchise model works for a franchisor, as they are not using their capital to set-up and expand, a franchisee is putting up that capital instead. That may sound a bit draconian, but that is the reality. However, in doing so, a win-win scenario is created: the brand expands and the franchisee benefits from the brand expansion too.  A good franchisee will understand the value a brand brings to their business, not only on a day-to-day basis, but when they wish to sell their business too. If they join when they are say, the 10th franchisee and they sell when the network is say 100-strong, then the brand has more value and they should benefit from any re-sale.

 

Control, trust and people:

Ok, for those of you currently in employment, please do not take this the wrong way! This is a general statement, but franchisees, who have made an investment and whose business it is, do tend to care more. There, I said it! There should be a greater level of control of the operation and customer care, which leads onto greater trust by the franchisor. A wholly owned multiple-site operation may not lead onto a trusted form of autonomy. At the end of the day, the drive and passion of a business owner will probably be greater than an employee. Please feel free to shoot me now, or turn off your PC!

 

Recruiting and managing people:

This is a subject area that seems to grow, rather than remain constant or diminish. Recruiting and managing people is not an easy affair these days. Whether the HR world have created a rod for their own back, only time will tell. Recruiting, training and managing a large team is not only time consuming, but very expensive. A large franchise operation does not have the direct issues or costs to deal with. There is obviously the initial training provided by a franchisor and, if they are good, on-going training and development of the Operations Manual too. However, the franchisee is responsible for their own employment status and their own staff. This is a burden the franchisor does not have overall and it means they can focus on expansion and support.

 

But it is not always plain sailing and that is why a franchisor will take their time in finding the right franchise business partners to grow with. Perhaps that will be the subject of my next blog?

 

However, my answer to this question is……….  I love setting people up in business and making them successful. Simple.

 

To learn more, please visit www.mywindowcleanerfranchise.co.uk or call Ian on 07841 664652.

 

 

 

 

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