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WHY DOES FRANCHISING SUCCEED?

Guest post by: Kenneth Franklin

Article Overview: The reasons why franchising is successful.

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WHY DOES FRANCHISING SUCCEED?

Why does Franchising succeed?

One of the first questions people ask about franchising is “Why does it succeed?” While each successful franchise has its own particular reasons for success, all franchises share common advantages that make franchising a sound business decision.

The nature of a Franchise

A franchise provides a proven system of operations that can assure success for the two parties involved: the franchisor and the franchisees.

By the time a franchisor is ready to franchise, he or she already has worked out the kinks associated with starting a business and has established policies, procedures, and service standards that have proven successful. The franchisor passes all this information to franchisees when they buy into the system.

benefits for the franchisees

Franchisees receive a turn-key business that often has an established image with consumers. This eliminates a lot of the guesswork associated with starting a new business; franchisees don’t need to determine which products or services work or which market segment to target. The franchisor provides this.

The franchisor trains franchisees to ensure the proper operation of the business. Franchisees need no prior knowledge of the business, but require the drive necessary to run a business in order to succeed.

The franchisor also provided them with supporting material, such as manuals and on-line assistance. Help is only a reference book or phone call away. Different types of evaluations (e.g. periodic on-site visits) also help to ensure the franchisees meet standards and minimize problems.

Franchisees receive the benefits of owning their own business while enjoying the advantages of an association with a collective organization. A franchise system has increased purchasing power for products and services and can bargain for better advertising rates than an independent business.

benefits for the Franchisor

Franchising allows the franchisor to grow without the costs associated with conventional methods of expansion. The franchisees absorb many of the start-up costs of their businesses and pay the franchisor a franchise fee for the right to get into the business and the use of an established system. The franchisor also receives ongoing royalty payments from all franchisees for continuous help.

This incoming capital enables the franchisor to concentrate on penetrating areas, developing programs that improve operations, and doing research and development that benefits their franchisees. This work allows franchisees to concentrate on running their businesses and increasing their sales which results in higher profits and higher royalty payments to the franchisor.

a complimentary relationship

While many factors contribute to the success of a franchise, the complimentary relationship between franchisors and franchisees is the foundation for the success. By mutually benefitting each other, the members of this business relationship enjoy advantages not available to independent businesses.

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About the Author: Kenneth Franklin
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Thirty-five years ago Kenneth Franklin founded Franchise Developments, Inc., the oldest major franchise consulting firm in the U.S., in order to help start-up franchisors plan and develop their franchise program and established franchisors and licensees to further sophisticate and improve their existing programs. Ken has: â€¢Have helped over 600 start-up franchisors in the U.S. and in 26 other countries. â€¢Have worked with 27 Fortune 500 or International Fortune 500 companies such as General Electric, H.J. Heinz, Union Carbide, British Petroleum, and Televisa. â€¢Offer a total franchise development program that includes operations manual development, marketing plans and franchise sales recruitment materials, marketing and sales brochures, training programs (custom designed or standardized), support packages, strategic and financial planning, legal assistance, psychological testing of franchisees and ongoing franchise consulting. EDUCATION AND RELATED ACTIVITIES â€¢Masters of Business Administration at the Graduate School of Business Administration, Syracuse University â€¢Graduate of Louis Allenâ€™s â€œAdvanced Management Training Programâ€ â€¢Assistant Professor of Marketing at the Graduate School of Industrial Administration, Carnegie-Mellon University

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