Monday, October 14, 2013

About Franchising

Undoubtedly, the business type with the greatest surety of success and financial return (and the least management freedom) is the franchise.  This is why they are described as "Structured Opportunities" in my workshops and in my book.

People who do well in a structured opportunity tend to fit a profile best described as a Natural Franchisee.  These are people who are hard working, are educated with a commitment to life-long learning, are well organized, and work well with others.  They tend to be most comfortable taking direction from others and working in situations where tasks are laid out step by step.

What distinguishes a franchise is that you, the entrepreneur, are purchasing a business system complete from a to z, including supplies, services, even start up training and on-going consulting, plus national advertising and management support for which a regular franchising fee is paid to the franchiser.  Franchises are available in every industry, selling almost any product or service you can imagine.

Franchisers tell you what to sell, how to sell it, how to dress, when to work, where to locate your business and so on, and provide you with regular ongoing management and marketing support. 
The big advantage of a franchise is that most of the bugs are out of the system.  With the best franchises you are literally guaranteed an income and a return on your investment if you follow the franchiser's game plan.  Another plus is you are buying a job which you can sell when you retire or are ready to change jobs.  Try that with your current job and see how far you get.

Franchise opportunities are a good option if you need a guaranteed income, and if your background and personality is such that you are most comfortable working in a structured situation, or, if allying your existing business with a national firm makes sense. (If you're not sure if a franchise makes sense for you, take my quiz: What Type of Business Best Suits You.)
One drawback is that many if not most franchisers actively discourage and some even prohibit innovation and experimentation by a franchisee.  The Big Mac is a huge product marketing success worldwide, yet when McDonald's franchisee Jim Delligatti of Pittsburgh innovated with a double deck burger he wanted to test market, he had to beg and badger Ray Kroc and the McDonald's management team to get permission to offer it in one just marginal store.  It increased sales by 12%.  Even so, Kroc and the brain trust were reported to be less than enthusiastic.  Innovation was their job, not the franchisees.  It took requests for the "Big Mac" from store owners across the country before McDonalds relented and allowed one of their biggest winners to be added to the national menu.  Not all franchisers are this way, but many are.

If part of the appeal of owning a business is innovating and pushing the envelope, then franchising may not be a good choice for you.
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