f youve started a successful business thats expandable into new locations and markets, franchising just might be the breakout strategy youre looking for. Franchising is an ideal path for companies that seek fast growth
and its also a bulls-eye if youre looking to keep the quality level
and performance of each location at its best. According to Mark
Siebert, CEO of iFranchise Group, a consultancy for companies
interested in franchising, statistics indicate that locations operated
by franchisees consistently out-perform company-owned locations in
quality and revenue.
This is consistent with Stuart Mathis
perspective. As president of The UPS Store, he works with over 4,900
franchisees. We asked him on our radio show why UPS is utilizing
franchising rather than opening company-owned stores. He confirmed that
its entrepreneurs that make each location a success. "They have an
energy and passion that company men just wouldnt be able to equal."
Franchisors are defined by three basic ingredients:
- the use of a common trademark
- the provision of assistance to the franchisee
- the collection of fees, royalties, mark-ups or other monies from the franchisees
if you could see yourself developing these key ingredients, franchising
still may not be for you. There are distinct pros and cons.
start with the cons: youll make less money per location due to revenue
sharing requirements with franchisees, so youll have to grow the total
number of locations to a substantial enough number to overcome the
lower "take" at each location. Also on the downside, maintaining
relationships with numerous franchisees can be a colossal undertaking.
In fact, you can expect franchisee relations to become a dominant
aspect of what you do everyday.
Dont get us wrong,
though - franchising can work. The pros: franchising helps you enjoy
rapid growth and higher quality per location. And dont forget that 40%
of retail sales volume in the US, some $1.5 trillion, are coming from
franchises - thats nothing to sneeze at!