The Advantages of Owning a Franchise - dummies

By Consumer Dummies

If you are looking to start your own business, you may want to consider franchise ownership. Your chance of success in franchising can only be as strong as the franchise you select. Mature, well‐operated franchise systems generally possess the following traits.

Overall competitive benefits

The public has become accustomed to a certain level of quality and consistency from branded locations. A branded location is a business that the public thinks of as a chain because each location has the same name, decor, products, services, menu items, and so on, and the customer experience is the same regardless of the location. Whether a company’s product is superior or mediocre, if its locations are successful, the secret for its success will likely be in its consistency.

One of the secrets of being a good businessperson is not accepting a poll of one: Just because you find a product or service outstanding or mediocre doesn’t mean the rest of the world does.

Regardless of where they are, consumers believe they understand the level of quality they will receive when they shop at a branded location. Because of this perception about branded chains, new franchisees often have an established customer base on the day they open. Branding enables franchises to compete with the well‐established, independent operators and even against other franchised and nonfranchised chains.

The advantage of brand recognition also extends to national accounts. Companies look at a system that has a network of locations and trust that each will operate at the same level of consistency and commitment. That type of system can service their needs wherever the franchise has a location.

Pre‐opening benefits

Although the cost of entrance into a franchise system includes a franchise fee, which is often cited as a disadvantage, the franchisee benefits from the franchisor’s having tested operating systems, initial and advanced training for management and staff, operations manuals, marketing and advertising programs, site‐selection tools, store design, construction programs, the reduced cost of equipment, and the other necessary support required to successfully launch their business.

Additionally, franchisees can ask their franchisor — a seasoned partner — questions, and they have a network of other franchisees in the system who can also be of assistance.

Ongoing benefits

Franchisees benefit from the home‐office and field‐consulting assistance most franchisors provide. Franchisees enjoy the purchasing power that comes from joining with others, which often results in a reduced cost of goods. They benefit from professionally designed point‐of‐sale marketing material, advertising, grand‐opening programs, and other marketing materials that independents could never afford. Franchise systems can also afford to modernize through ongoing research and development and by test marketing new products and operating systems.

Each franchisee’s spending power is combined with the spending power of all the other franchisees in the local market and in the rest of the system. This combined spending power — on advertising, for example — coupled with targeted strategic growth can result in market critical mass. Establishing critical mass enables franchise systems to not only dominate local markets and the established independents but also to compete effectively against large, established chains.