Advantages Of Franchising
Six Advantages to Help You Build Your Franchise Empire
When you buy and open a franchise business, you do so with six distinct advantages that you (almost) can’t get any other way.
These advantages may very likely prove to be the difference between breaking-even in a business and just getting by from month to month, to building a profitable and satisfying empire that you can sell when you’re ready to retire.
You can’t get these advantages when you open a business on your own. These advantages are unique to franchising. Once you understand these advantages, and the protection they provide to you, you’ll gladly pay extra money to buy a franchise business.
Following is an overview of the advantages with some insights as to how you can utilize them to your financial benefit.
#1 The Operating System
Many “experts” have said that the leading reason for business failures is lack of capital. People fail when they start or buy businesses because they run out of money.
Duh! Isn’t that obvious?
What the “experts” miss is why business owners run out of money. It’s not always because they had too little capital to begin with; in fact, it’s likely they had plenty of money, especially in franchising.
So why did they fail? Because they didn’t know what to do, how to do it, or when to do it!
In other words, they didn’t have an operating system.
The operating system is the best justification for a franchise. The value of the operating system is immeasurable if you know how to use it and you use it wisely. The operating system is like sheet music to a musician. The musician knows which note to play, when to play it, even how to play it, just by following the notes on the page.
In franchising, the operating system is your sheet music. Everything has a purpose. You should never do anything in franchising – hire people, spend money, invest in an advertisement, buy products – without knowing why you’re doing so, and in what order. Your business operates neatly and orderly when you follow the system.
Understand that franchisors spend years and untold amounts of money developing a workable operating system. It doesn’t happen overnight.
In fact, franchisors go out of business in their early years of development when they don’t have enough money for trial and error. Trial and error is what it takes to develop a successful operating system. If this advertisement doesn’t work, make a change and try this one. If that one doesn’t work, make another change and try it again. Try, try, and try, until you get it right.
You don’t have to try. Trying costs money. The franchisor has figured it out for you and delivers the operating system to you as a package. All you’ve got to do is follow the operating system!
After developing a successful operating system, the franchisor then develops a training program for franchisees. It’s now the obligation of the franchisor to transfer knowledge to the franchisee.
One of the great things about franchising is that you don’t need any specific education to qualify to buy a franchise. The franchisor’s training program, if it’s a good one, will teach you almost everything you need to know to become a successful franchisee.
You can’t attend a franchisor’s training until you buy a franchise because training includes not only information and knowledge, but also insights and even secrets that the franchisor shares only with franchisees.
Imagine starting a business without training. Of course, people do that all the time. And they fail!
Franchisors offer initial training and ongoing training that occurs at regional and annual meetings.
#3 Ongoing Support
After the franchisor provides a week or many weeks of initial training, the franchisor also provides ongoing support to franchisees.
Suddenly you’re stuck. You’re operating your business on a Saturday afternoon and you realize you don’t know what to do. The customer is standing right in front of you and you can’t deliver. If you don’t deliver, you’ll lose the sale. What do you do?
If you’re not a franchisee, you punt. If you are a franchisee you pick up the phone and call someone. Could be your coach at franchise headquarters, or it could be a field operations supervisor. Or it could be a fellow franchisee. You’ll get the answer and you’ll make the sale because you’re a franchisee who benefits from ongoing support.
You know something’s not right. You’re following the system, you’re making sales, and your business is percolating. But you’re not making enough money. Why not? When you sit down and share your numbers with the franchisor’s support team, or among a group of like-minded franchisees, you’re going to get the answer.
Without a franchise, who’s going to support you in times of need? Who’s going to help you understand the dynamics of your business? You’re on your own. But in franchising, you’re in business for yourself, by not by yourself.
#4 The Franchisee Network
There’s power in the franchisee network!
Good franchisors bring their franchisees together at least annually to celebrate their success. They also use this opportunity to provide additional training and support, to disseminate information, to introduce new products and services, and to build relationships with and among franchisees.
The franchise annual meeting is an event that few franchisees ever want to miss because . . . there’s power in the franchisee network!
When the franchisor recognizes the top franchisees for sales performance – the folks who are making the most out of the operating system – you’re there to see who they are.
Next day you run in to one or two of them on the golf course, or at the swimming pool. You congratulate them, but you also strike up a conversation. How’d they do it? How can you do it, too? They don’t mind telling you because you’re not a competitor. You’re one of them.
As a franchisee, you will develop close relationships with other franchisees -- people who work the same operating system that you do. There’s no other system of business that puts like-minded people together and encourages them to share information with each other. That’s why there’s power in the franchisee network.
#5 Economy of Scale
This is a huge opportunity, but it’s not exclusive to franchising. Whenever a group of people or businesses buys the same product or service, they can drive down the price through volume. That’s Wal-Mart’s methodology.
So if you’re in the hamburger business, how much will you pay for a hamburger roll?
A lot more than any McDonald’s franchisee will pay!
If it’s just you in the hamburger business, and even if you own multiple locations, you’re going to pay near retail prices for most everything you need to operate your business.
Meanwhile, pity you if a hamburger franchise pops up across the street from you. Your hamburger may be healthier, even tastier, but your cost of goods will require you to charge more, probably much more. And as soon as that franchisee begins to out-market you (paying reduced prices for advertising), you’re in trouble.
When you’re part of a franchisee network, you get the advantage of lower prices, proving once again: there’s power in the franchisee network.
It’s difficult to make a name for yourself all by yourself. Franchisees don’t share that pain. They may start out as only a few, but once they get to several dozen in the same region or state, they become a household name, at least in their market. Once they hit thousands of outlets, they’re branded nationally, and perhaps internationally, too.
Consumers love familiarity. That’s why we all frequent the same places over and over again. We don’t like to shop around. Once we find a brand that we like, even if it’s not perfect, we become loyal customers.
Branding is also not exclusive to franchising, but it’s a huge advantage for businesses that operate under the same name. It also costs less because multiple owners share the costs of branding.
These six advantages are by no means the only advantages of franchising, but they may be the only advantages you need to build a thriving franchise empire that guarantees our financial independence.
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