Advantages of a large franchise network
In the last post, we discussed the advantages of smallfranchise networks.
In this post we’ll look at the advantages of large franchisenetworks.
Large networks, those with more than 250 franchisees, havethree distinct advantages over all the other franchise networks: Money. Money.Money.
While many people (especially would-be franchisors)believe that franchising is a model for building a franchisor’s personal ATM,franchising is expensive. And since the majority of franchise networks in NorthAmerica include fewer than 250 franchisees, many small franchisors areconstantly scraping for money to build their networks and meet their financialobligations. Consequently, and unfortunately, these smaller networks sometiemsstruggle to afford the personnel or develop the resources to assist theirfranchisees. And when franchisors fail their franchisees, trouble isn’t farbehind. As George Bernard Shaw told us, “Lack of money is the root of evil.”
However, it’s an entirely different story once a franchisorturns the corner and makes it to large-franchise-network-status. For most ofthose networks, money isn’t a problem, and, depending on the franchisor’sintegrity, that’s a huge advantage for franchisees.
At the A to Zs of Buying a Franchise, the InternationalFranchise Expo’s most popular symposium for more than 20 years, we often hearthe seminar leader, Dr. John P. Hayes, state that not all franchisors arecreated equal. “Some are better than others,” he explains. “Some understandthat their primary role is to generate profits while creating satisfiedfranchisees, or customers. Their primary job is not to enrich the franchisor byhoarding all the money!”
Money, enough of it at least, makes it possible for the largenetwork franchisors to cater to their franchisees, which effectivelyaccelerates the new franchisee’s performance and leads the franchisee toprofits and satisfaction. In these cases, everyone wins. The franchisee buildsa successful business, which generates bigger royalties that are paid to thefranchisor; the franchisor collects more money, which can be re-invested in thefranchisees; the franchise network enjoys a reputation for success, which sellsmore franchises! That’s precisely how franchising should work, and it does mostof the time, especially among the large franchise networks.
With money, there’s no end to what a franchisor can do forits franchise network, and “do” is the operative word. Benjamin Franklin toldus, “The use of money is all the advantage there is in having it.” Here arethree ways large franchise networks use money to help franchisees:
1. They hirecorporate staff . Good franchisors recognize their limitations and they canhire experts in training, marketing, brand development, franchisee support,research and development, HR, legal, accounting, etc. In the small franchisenetwork, it’s not unusual for the founder to fulfill several of those keyroles.
2. They offertraining programs regionally as well as nationally so that more franchisees canparticipate in them, and when necessary, they spend time in the field workingone-on-one with franchisees in need. They help franchisees better understandhow to operate the business and they re-train franchisees when necessary. BillGates told us, “We’ve got to put a lot of money into changing behavior,” andthat’s especially true in franchising, which depends on people from diversebackgrounds. Franchisors with limited resources hope their training sticks thefirst time the franchisees hear it because they may not get a second chance.And yet, more frequent training results in more franchisees succeeding, buttraining is expensive.
3. They contribute(or possibly loan) money to the franchise advertising fund to better promotethe brand and drive more customers or sales opportunities to the franchisees. Afranchise network that’s strapped for money must rely on the franchisees topromote the brand, but how effective is that if the franchisees are alsostrapped for money? Large franchise networks bring resources to theirfranchisees’ advertising and promotion campaigns.
Small franchise networks pray for the day when they breakthe size barrier because, as Ayn Rand told us, “All sins are forgiven once youstart making a lot of money.” Of course, large franchise networks don’t justconcentrate on making a lot of money; they focus on meeting the needs of theirfranchisees. Marilyn Monroe told us, “I don’t want to make money, I jut want tobe wonderful.” So does every franchisor.
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