The Benefits of Franchising

The Benefit of franchising

For franchisees, benefits include: a higher chance of success than in a sole proprietorship; shorter time to opening; initial training and ongoing support; the selling power of a known brand; lower costs through group purchasing; use of an established business model; national and regional advertising campaigns; customer lead generation through websites and centralized call center; and a network of peers (fellow franchisees) to provide advice and moral support through a company intranet, annual conferences, and franchisee associations; and, increasingly, assistance with securing funding.

“Follow the system” is a mantra in franchising and critical to a franchisee’s success. Franchisees buy into the franchisor’s operating system believing that if they follow it to the letter they will succeed and be profitable. Smart franchisors are always open to suggestions for change (as well as local or regional variations) from their franchisees, but any franchisee departing from the “system” without franchisor approval risks violating the terms of the franchise agreement, which can result in revocation of the franchisee’s right to do business under the franchisor’s name. Franchisees also must agree to keep the franchisor’s proprietary system and trade secrets confidential, as well as sign some type of non-compete agreement.

Not everyone is cut out for franchising. Some need total independence to succeed or fail on their own, while others prefer the trade offs found in working for a organization. For the franchise partnership to succeed, the buyer must be comfortable not only with the franchise model, but also with the culture, values, and goals of the franchisor – and vice versa.

In this light, many view franchising as a commitment much like marriage. A good match between franchisor and franchisee, sharing mutual goals over the long term, is essential to the success of each franchise unit, and thus the brand as a whole – an essential factor that must be considered seriously by both parties before any contract is signed.

Advantages from a Franchisee’s point of view:

  1. Avoiding the unnecessary trial and error period in starting and operating a new business.
  2. Lower financial risk, compared to other ventures, because investment costs are lower and profit margins are higher.
  3. Business Format Franchising complete packages ensure a ready to go “turn-key” franchised unit.
  4. Managing a small business whilst depending on the power of the franchisor company which has a bigger organization.
  5. The franchisee has an opportunity to run a proven business concept with a successful operational track record.
  6. The opportunity to learn the latest developments and changes in the local and global market from the franchisor and focus entirely on developing the sales revenues.
  7. The benefit of operating under a recognized trade name/trademark, which can have better marketing results.
  8. The franchisee has access to accumulated business experience and technical know-how in managing the business.
  9. A unified brand design which leverages the business reputation in marketing the concept.
  10. Easier purchasing, storing, and product display systems.

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