Business

5 Principles of Franchising You Should Know About

A franchise is a very attractive business model that has over time proven quite successful. In essence, it means that a franchisee buys a license to do business in the name of the franchisor. In doing so, they gain access to trademarks, knowledge, and processes needed to create the goods or services of the same quality as those of the original brand.

It provides important benefits for both parties included. The franchisee gets an opportunity to develop a business without having to start from scratch. They can benefit from any marketing activities done by the franchisor, and the franchisor usually provides training, so they don’t have to have any previous experience in the field. The franchisor benefits from the situation as well – they spread their business at a very low cost, and their brand reaches new locations.

Because there are benefits for the franchisor, and not only the franchisee, it’s important that both parties try to promote the success of the franchise. When it comes to the franchisee, their mission is clear – make the business work. However, when it comes to the franchisor, the situation is less clear. So, here are the 5 important principles of franchising you should follow if you want to help your franchisee succeed.

1. Be honest

In marketing, it’s easy to fall into the trap of manipulating facts in order to attract your target. Even so, when it comes to franchising, it is highly recommended that you avoid doing that. Remember that it takes time and resources to run a franchise, and don’t make it sound carefree and effortless. Refrain from implying that achieving success is easier than it actually is. It’s in your interest to have a good, hard-working franchisee, which will respect your brand’s good name and spread your network of customers. It’s far better to lose a potential client based on truthful reports than gain two based on false claims. If your franchise is a lead-on, you can count on the vast majority of people giving up on it very soon after they start the business. Avoid that by simply being truthful about what they should expect.

2. Provide training for the franchisee

Always keep in mind that the franchisee represents your brand. Therefore, you need to make sure that they are properly equipped to do just that. Training is one of the basic necessities of starting up a new franchise. Unfortunately, it’s sometimes avoided or reduced because of the misplaced attempts at saving money. This means that, once the franchise is on its own, it’s likely to abandon the franchisor’s business practices, which can lead to a drop in quality of the product or service they provide. Because this could reflect badly on your brand, providing good training for your franchisee is in your best interests. If you don’t have the money to provide proper training, it’s better to postpone the process until such a time when you do. That way, the franchisee will have the best possible chance to succeed, and your brand will be in good hands.

3. The franchisee has to be able to make money

The point of every business is to make money. The same goes for franchises. However, in many cases, the royalty fees imposed by the franchisor are too high, which very often dooms the franchisee at the very beginning. It’s in your interest for as many franchisees as possible to live on, so you need to be reasonable about the expenses. If you don’t give the franchisee the best chance to succeed, it likely won’t. Be open and honest about both the expenses and the chances of success when discussing the possibility of a new franchise. Take Chatime franchise as a good example. Their website holds all the necessary information, including the costs of starting and operating a franchise. This kind of transparency can go a long way in ensuring good franchisor-franchisee relation, and it improves franchisee’s chances of success.

4. Measure performance

As a franchisor, it’s in your best interests to know how your franchisees are doing. Make sure you measure their performance and evaluate their finances regularly. This will give you valuable insight into how well the overall franchise program is going. This knowledge can help you when it comes to creating business strategies and it can make certain decision-making processes easier. Knowing exactly how well your brand is doing in different geographical areas can be extremely useful as well, so make sure you collect all the data you may need in the future.

5. Focus on the long-term gain

While there may be some drawbacks to franchising in the very start of the process, they pay off in the long run. First of all, you will have talented, hard-working, and independent people spreading your brand. The reason for this is the fact that the most capable and motivated individuals prefer investing in a business and collecting profit, to becoming an employee and receiving a salary. Therefore, your business will probably be in better hands than if you were to branch out and find new management. Next, the franchisee has to pay to buy the rights to work under your name. That means that your brand will be able to grow in a new location without you having to invest a lot of your own capital, which translates into saving quite a bit of money. Finally, there is a minimal financial risk in franchising. Through royalties, you can actually earn quite a pretty penny, and because you don’t have to put a lot of many into each location, those earnings may be higher than if you opened the outlets in a regular way. All of these are important long-term benefits that definitely overweigh the downsides and make franchising worthwhile.

Franchising remains a very successful business model. The success of a franchise is very important for both the franchisee and the franchisor, so they both need to do their parts in achieving their common goal. Do your part as the franchisor, in order to help the franchisee set up a successful business, promote your brand, and earn you money.

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