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Should Your Business Consider Franchising?

Written by: Rod Young

Article Overview: If you are serious about building a substantial business you should benchmark your progress against global industry peers not just your local competition. You will soon find that franchising offers the opportunity to build truly national and global businesses on a scale that your non-franchised competition just cannot match. Many of the worlds most successful companies such as Coca Cola, Shell, Toyota, BP, Ford, Pepsi, General Motors and of course KFC and McDonald's have built domestic and global brands using franchising as a management and marketing tool far outstripping the enterprise value of their non-franchised counterparts. A franchise network spanning national (and potentially international) markets offers better diversification and insulation from localised economic or competitive forces and early access to high-growth markets.

Should Your Business Consider Franchising?

In a well developed franchise network the customer service experience is better than in a company-owned business. In a franchised business, the owner operator is focussed at the customer end of the business and interested in the lifetime value of the customer not just a one-off transaction as is often the case with paid employees. Another great benefit experienced by franchised networks is the micro-management of overheads and staff that creates operating efficiencies far better than many company-owned competitors. This gives franchised businesses the edge over competitors who are still operating traditional non-franchised business models.

Subway is the global leader in the sandwich business that was built on the back of a full business-format franchise program. From its base in America it has built a global business with over 16,000 stores built on a business model developed by its founder Fred DeLuca. Subway store numbers are expected to exceed that of McDonald's within 2 years.

Gloria Jeans Coffees used franchising to develop their domestic business in Australia and are now approaching the 400 stores in Australia outstripping the growth of international giant Starbucks who do not franchise. Gloria Jeans has been so successful in its home market it is reaching market saturation and is almost at the maximum stores that the market can sustain. Gloria Jeans has leveraged the national network to create beachhead stores in over 20 countries and they expect that there will soon be substantially more of their coffee shops overseas than in their home market.

UK sandwich and coffee operator Prêt a Mange has developed its London based business model as both a company-owned and a franchised structure to reward key staff and facilitate expansion into the US. It now feeds hungry New York residents from a multi-store base which it plans to expand across America.

In tiny domestic markets like Australia which represents less than 2% of the world's economy, the ANZ Bank used franchising to develop a mortgage broking network that now settles Billions of dollars in new loans each year through a network of ANZ branded and franchised mortgage brokers.

A further example is the Boost Juice network which had reached saturation with maximum store numbers in a county of just 20 Million people. It had a choice of managing a maturing business simply maintaining static store numbers and sales of around $100 Million in one country or franchising overseas for growth. Boost Juice Bars can now be found in Indonesia, Singapore, Malaysia, Thailand, Hong Kong, Macau, Kuwait, Chile, Brazil, South Africa, the UK, Estonia and South Korea with more countries coming on-line as a result of a well developed and executed International franchise program.

Expansion through franchising is not just confined to the foodservice business. Many retailers from body care retailer Body Shop, hairdresser Toni & Guy, auto service network Midas and child development franchise Helen O'Grady's Children's Drama Academy are just a few of the hundreds of retail and service businesses who now have huge domestic as well as multi-country global networks.

Banks and other financial service businesses are now franchising their expertise and brand to grow better and more profitable businesses and even medical businesses are moving to expand their network through franchising. Governments are granting franchises embracing transport, water and energy distribution and generation. Sport is heavily structured around a franchised model in basketball, football and motor sports. Even franchised businesses located in major markets like the United States need to develop a global outlook as competitive pressures impact growth, the domestic economy matures and the future global growth opportunities are shifting to China, Brazil, Russia and India where franchising is a newly emerging opportunity for both domestic and foreign franchisors.

The reward for a business that has successfully executed a domestic and international franchise program is significant growth in shareholder value. Whether your business network is located in Europe, North or South America, Africa, Australia, India or Asia, a franchise strategy needs to be considered earlier rather than later in your domestic growth phase to take advantage of growth opportunities and a defence against internationalisation of the local market.

The combination of capital for expansion and a motivated owner-operator investing in his or her capital and time in both your brand as well as his or her business is a powerful strategic combination.

You may feel the development of a franchising strategy should be delayed or is too complex and overwhelming but with the right advice and a staged approach to developing the strategy, structure, economics and commercial policies needed to plan a successful franchise network you too can adopt a "born global" attitude that will allow your business to join the thousands of franchise systems now operating in domestic foreign markets.

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  Newsworthy Trends in Franchising
  What is franchising? My personal definition!
  Franchising Is a Better Path to Success than Opening a StandAlone Business

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Related Forum Posts
New Small Business Topic - Hello everyone, I'm on the lookout for new topics to add to my site. We just launched a Franchising section and are planning Human Resources section. Do you have any thoughts for a new section? Here's a list of what we currently have: Angel Investors Branding Bank Loans Business Coaching Business Plan Franchises (New) Insurance Legal Marketing Public Relations Sales Small Biz Loans Venture Capital
Re: Hello EvanCarmichaelers, and Thanks! - "Carmichaelers" ..nice.. Over at the Young Entrepreneurs I'm going to start calling my readers "DSilvelers" - I like the sound of that! Welcome on board theFranchiseMarket. Do you run a Franchise Business or are involved in Franchising in anyway?
My entry - 1. The Best Business Books Ever: The 100 Most Influential Business Books You'll Never Have Time to Read - this is a fascinating book about the history of Business theory, and I'd recommend it to anybody. 2. The Big Book of Small Business: You Don't Have to Run Your Business by the Seat of Your Pants, by Tom Gegax. Ditto. 3. PADI: The Business of Diving Book Okay, so this book won't be of use to anyone who doesn't want to start a scuba store, but I did, and this book was of course invaluable to me in reaching that goal.
Re: Top 50 Lists - Hi Evan, How about "Top 50": -Inventor Blogs To Watch -Franchising Blogs To Watch -Business Book Review Blogs -Women Entrepreneur Blogs -Young Entrepreneur Blogs
Franchising & Licensing Can Be The Same Thing - FTC Rule 436 defines franchising as anyone offering an Agreement that contains these 3 things: 1. Licensing a "Mark" - which can be a trade name, service mark, commercial symbol, slogan, etc. 2. In the body of the Agreement, there contains, significant controls and assistance. 3. The licensee is paying the licensor in excess of $500 within the first six months of the actual offering of the business. Licensing and Franchising can mean the same thing today. If you do not decide to franchise and comply with FTC Rule 436, you may be in violation of Business Opportunity Laws that exist in 24 individual States.


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