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Guest post by: Jim Coen Become an Author

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Having had the good fortune of working in the franchising community for 25 years, I have come to define very personally the concept of franchising. When trying to define a term or concept it is important to understand what it is not.

Franchising is not an industry. Too often I hear people talk about the industry of franchising. It is like referring to joint ventures as an industry, or subsidiary operations as an industry. Franchising is not a guarantee for success. No business can guarantee a successful outcome. Franchising is not a “get quick rich” scheme. It is a business that requires patient capital. So if that is what franchising is not . . . what is it? What is franchising? Franchising is a method of growing a proven business model into a brand name. My personal definition of franchising includes five key elements.

1. Franchising is a business of numbers. It is about creating dominance in the marketplace. The fastest way to develop a brand in a particular market area is with number of units. The more units the greater brand recognition and market dominance prevails. The synergy created by each franchisee contributing to developing the brand returns value to each franchisee participating. The greatest advantage to franchising is that it can accelerate growth, develop a brand faster than almost any other method.

2. Franchising is the business of consistency. Consumers develop an appreciation for the product and service and learn to have confidence that the product and service is consistent through the chain. The franchisor develops a system to deliver that product or service consistently; it looks to each and every franchisee to implement that system. A successful franchise system is constantly seeking ways to improve the consistent delivery of product and service the consumer has grown to expect.

3. Franchising is the business of risk minimization. Since the prospective franchisee is bringing their capital, time and effort to an already proven business model, success is much less risky than when that franchisee trys to do things on their own.

4. Franchising is the business of mutually beneficial relationships. All parties must participate in the fruits of their labor equally. Franchisees must generate sufficient profits and returns on their investment to continue to develop and grow their business, Franchisors must do the same to be able to continue to invest and grow the numbers and brand, and Consumers must get value for the products and services they receive.

5. Finally, franchising is a lifestyle. Someone who goes into their own business is different from someone who wants the protection of a well-established business which employs them.

Franchising represents a more viable approach to business ownership. For a price, the franchisor teaches its proven business methods to the franchisee who shoulders all operating and financial responsibilities of the outlet.

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