Franchises are everywhere these days, from the cleaning services industry to the health and fitness industry. Some well-known fast food franchises include Tim Horton’s, McDonald’s, and Dairy Queen. So why are franchises so abundant? Growing businesses can acquire much needed cash through franchise-licensing fees. Furthermore, successful franchising can prove the effectiveness of a business model to banks, making them more willing to lend money.
However, franchising is not for every business. When you sell someone a franchise, you give him or her the right to sell under your company’s name. Since this person now represents your company, properly training and continuously motivating and supporting them is now your responsibility. You no longer wholly own your business either because the franchisees are not employees, but partial owners in their own right.
Given the open structure of the franchise model, I think franchising better suits companies targeting a large market and focusing on competitive pricing because differentiation strategies would require a more controlled, cohesive approach. However, carefully executed, well managed franchising could still work with a high quality, differentiation business model, especially as a solution to high start-up costs. In conclusion, franchising is an effective method every growing business should consider.
Articles:
http://techandscience.com/techblog/ShowArticle.aspx?ID=572
http://www.franchisedirect.com/top100globalfranchises/rankings/
Image:
Anticipation Imaging Partners. “Want a Franchise?.” Text. Anticipation Imaging Partners.com 2008. 7 Oct. 2012
<http://anticipationus.com/ContactUs.html>.
For the most part, I do agree with the advantages of operating a franchise. However, I feel that when you say ‘growing businesses should consider franchising’ a little underdeveloped and disagree partially with this.
I would like to address that franchises are only mostly effective once the company has reached a certain level of success and recognition. When you stated that franchising is an effective strategy for ‘growing companies,’ I think it would be better stated that the company should begin franchising once it has grown large enough whereby people will have the incentive to own one of these ‘successful’ stores.
For example a Tim Horton’s is a successful as a franchise because it is already an established name. But Jim Porton’s (fake company), on the otherhand, who may be growing fast but only owns a few stores around Vancouver may not want to risk in franchising itself.
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