What a Franchise Company IS and What is NOT? Know the Difference!
When considering ways to grow a business, brand, and concept, franchising can be a really effective way to build a business and develop a brand. When considering whether to start a franchise concept, you should know what a franchise is and what a franchise is NOT. Franchise development can be a truly great way to expand, but some business owners will never be good franchisors and should focus on other business development models.
WHAT A FRANCHISE COMPANY IS:
1. A proven business model. Franchise success is dependent on a business system that produces profits. A great franchise organization has a proven system in place with a market that allows for franchise expansion in new markets. Franchising works only if the franchisor has something to TEACH and SHOW new franchise partners, without this there is little value in a franchise offering.
2. A business development system. Franchisees are dependent on some system that will help them generate business in their local market. A good franchisor will have some replicable system in place that will allow franchisees to experience success in their market. Cash flow is king in any new business and if a franchisor can’t deliver some element of new client acquisition it makes it difficult to have far-reaching success as a franchisor.
3. A competitive advantage over the rest of the market. Franchisees want some degree of market uniqueness when considering franchises. A good franchise model will have some way of delivering a competitive advantage to the franchisee so that when they open their doors for business they aren’t starting from square one. Franchising does not guarantee success to franchisees, it provides a leg up with a proven system and should help shorten the ramp-up time to build a mature, profitable business.
WHAT A FRANCHISE COMPANY IS NOT:
1. When you start a franchise company, it typically will not be profitable for the first year. Breaking even after the first year of franchise development is a successful franchise launch. Do not start a franchise company counting on the income from your franchise growth in the first year.
2. When you start a franchise company, you do not sell the rights and then collect royalty checks. It takes support, time, lots of calls, meetings, and patience to help franchisees and to deliver relevant support to franchisees which will in turn keep consistent royalty income flowing in.
3. Franchise development is NOT a way to fix a broken business model.
A new franchise is opened in the U.S. every 8 seconds of each business day. New brands and systems are built every day with the power of franchise growth. For more information on the process and whether franchising could be an effective way for you to expand your brand, contact Franchise Marketing Systems.
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