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Building Your Business Top Ten: Exploiting the Power of Franchise Systems

Written by: Sarah Gerdes

Article Overview: According to the International Franchise Association (IFA), franchise systems are responsible for more than forty percent of revenue in the United States yet make up less than 4% of the businesses. With less than fifty employees, the majority of these franchises are considered small businesses, generally run by entrepreneurs. Ambitious entrepreneurs often own three to seven franchises in the same city or region. Franchises offer a great businesses opportunity for entrepreneurs for a variety of reasons. Franchise owners are receptive to other entrepreneurs and will give honest feedback on new product ideas. Second, if they like your products, they can make the decision to carry your product on the spot. Yet many entrepreneurs overlook franchise systems entirely. Here are the top ten reasons to take a second look.

Building Your Business Top Ten: Exploiting the Power of Franchise Systems

10. Reason: Test a new product. Lot’s of entrepreneurs pitch the local pet franchise store. to test a new dog candy or breath mints. (you think I’m kidding). As independent owners, decisions are made on the spot.
One entrepreneur told me the owner of a pet store franchise tried a home-made dog biscuit herself, then gave pieces to dogs in her store, then placed an order for 200 AND, paid in advance!

9. Leverage. Most franchises have annual get togethers. Thousands of owners talk about the most important thing: what is making their franchise the most money.
An attorney turned gourmet cracker maker told me that all it took was one enthusiastic manufacturers representative to tell some franchise owners who in turn, came to the owner for the crackers and the viral market spread like-well-a virus.

8. No cost. Partnering with a franchisee doesn’t take lots of money. In fact, some franchise owners like ideas so much they decide to fund development.
This starts an actual partnership. Of course, you split profits on the back end, but for accepting development dollars, using their channel and reaping the rewards, it’s a good deal.

7. Penetrate new markets. Traditionally, a product is created for one market. Playing the franchise game means you can supply your product to non-competing franchise owners serving different markets.
One company provided greeting cards to Postal Plus, as well as a florist, cookies and promotional goods product. Each relationship is “an exclusive”, within a specific geographic area to other franchisees of the same system. However, this doesn’t limit visibility or new market penetration.

6. Trades. Franchise owners are notoriously cheap. They have to be. Franchisees pay steep fees every year (and sometimes every month) to the franchise system, regardless of the revenue. Every penny of profit margin is squeezed every single moment of the day. The upside is the tendency to work on trade with other small businesses.
Use this to get your product into the hands of their consumers until you gain a following. Then switch to products for payment with subsequent franchisees.

5. The franchise associations. The two primary franchise associations—the International Franchise Association (IFA) and the American Franchise Associations---love to partner with service providers where they can serve as a distribution outlet. Both have been known to partner with a product or service provider, assemble decision makers from the top fifty franchise systems and deliver a product pitch. This is done in return for joint marketing or even a split of the revenue.
One caveat here. Both require you join their organization, and the cost is a few thousand dollars.

4. Franchise retreats. Even if you have to spend two thousand dollars to join the IFA or the AFA, it’s worth the money to attend the association’s annual retreat. Usually only the top thirty percent of the franchises attend, but this is the cream of the crop. Deals are cut, partnerships made and lots of schmoozing with the who’s who of the industry.

3. Franchise retreats are in great places—Whistler, Palm Springs, Lake Tahoe. ‘Nuff said.

2. Franchises are market aggregators. An aggregator is a term that fits partnering the best, since it really means that through one organization, many other “downstream” companies—vendors—suppliers—and associated partners, benefit from the product line. As aggregators, franchise systems have the ability to penetrate entire markets, doing the marketing and distribution work for you.
Think about the gift shop next door. Once your product is a hit, this gift shop partners with you to sell the product to its corporate accounts, its sub-florists (such as hotel and hospital gift shops)…and each time taking (and giving) you a piece of the pie. In short, your single franchise partner has saved you twelve months of market penetration while fronting the burden of overhead costs, employees and economic risks. All you have to do is supply the product.

1. Start your own franchise system. If your idea is big enough, you know enough about the process, protocols and other people to help you launch your own franchise.

For more information on partnering, visit www.bmginc.com, and for additional entrepeneurial resources, visit www.MyBizHomepage.com.

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  About 60% of all franchise opportunities have less than 50 units.
  Export your franchise to Australia
  Steps to a Successful Franchise Experience
  Debunking Franchise Myths

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