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What Is Franchising And What Are the Benefits?
A successful business is one that can grow, or as the current lingo says ‘scale,’ and franchising is one way to do that. However, before you decide if franchising is the best way for you to expand your business, you have to be clear on what it means—that’s where I come in, as your friendly business consultant and franchise specialist.
So let’s talk franchising.
You might be thinking, instead of franchising, why not just expand into different markets and hire local managers so the profit comes directly back to you?
Well, franchising may or may not be the best way to expand your business. It’s kind of like when customers come into one of my M&M Meat Shops asking for our “best steak.” I train our staff to ask questions and listen to the answers to determine which steak best suits each customer. (Though, really, all of our steaks are restaurant quality, premium cuts, so any of them could be “the best” for a particular person. Just wanted to share that.)
But back to the meat of growing your business… franchising can be a great way to grow your business if you understand how it works.
Let’s start by defining franchising. In franchising your business grows by finding partners that will run the business exactly how you prescribe in markets where you want your brand to be. Franchise partners (or “franchisees”) pay you a monthly fee (“royalty”), usually about 6% of their overall sales, to use the brand, which includes the name and systems of the business.
The franchise partner’s initial investment includes a “franchise fee” that covers your portion of the cost to get their business up and running. The franchise partner is ultimately responsible for the success of their business, but you provide ongoing support, usually in the form of business coaching, marketing, training, and even some “emotional rescue” at times!
If you’re ready to franchise, it implies that you have figured out a business concept that makes money and can be easily replicated for expansion into other markets. You’re ready to scale up but you can’t be in two places at once, don’t yet know how to clone yourself, or could use a little help with the expansion capital.
Enter the franchise partner. The franchise partner who buys into your concept wants to be in business “for himself but not BY himself” (or herself). They want the security of buying into a proven concept and the support that comes with it.
And what’s in it for you? In a word: leverage. The ability to leverage the franchise partner’s investment money and time are one of the biggest benefits of franchising.
Let’s say, however, you want to grow your business and it’s running so smoothly that time and even capital to invest are not a problem. Why not just expand corporately, have full ownership in other markets, and just hire a manager to run the business? Well, that is an option, however, not all partners are created equal. A franchise partner with “skin in the game” is likely to put more energy into making that business a success than a local manager being paid a salary. In addition, a franchise partner living in the same community where they’re doing business can get involved in local events and likely has connections that will help them grow the business.
Lastly, we’ve all heard that “two heads are better than one.” Well, imagine the creative ideas generated from a team of committed “business heads” i.e., owners. Highly successful franchisors give franchise partners opportunities to provide front-line input about improving the system. Successful franchisors also hold regular meetings and conventions to keep franchise partners up-to-date on the current state of affairs, latest ideas, and team building. It’s like built-in business coaching.
I have a little success story for you to illustrate how franchising works. You may know that my father, Mac Voisin, is the founder of the national company, M&M Meat Shops. In case you haven’t heard the story, back in 1980, he and his then business partner, Mark Nowak, came up with the concept of selling high quality, flash-frozen food behind a service counter. Neither of them came to the table with any business experience or truckloads of money for that matter.)
Mac and Mark had invested their life savings into this concept and by 1981 it was clear there was a great demand for convenient but wholesome foods, especially as more and more women were entering the workforce. Instead of spreading themselves (and their bank accounts!) too thin, they found a franchise partner who also believed in the concept and could open a location in another nearby city. From there it grew to over 400 franchises across the country.
Almost sounds as if they knew something about franchising, although the way back then, franchising as a growth strategy was mostly only used with fast-food restaurants. However, it turned out to be a very practical solution to start spreading the brand, saving them money and time. You have probably noticed that nowadays there are all kinds of franchised businesses, from salons to mobile car washing to crime scene cleaning!
In summary, here are the key benefits of franchising:
Leveraging the capital and time investment
Having partners with “skin in the game” rather than employees
Establishing community connections and networks with local businesses, media, and organizations that can help grow the business
Exponential idea generation
Is franchising a good way to expand your business? Let’s find out. Contact me by phone or email to explore if franchising is the best growth strategy for your business.
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