Is there really a franchise for everyone?

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There is plenty of choice if you want to buy a franchise. Image: wa.gov.auSomething for everyone. Is it true for franchising? Is there a franchise system for everyone? Well, yes and no.

Let’s look at the “no” case first.

Franchising is not for everyone

While the credentials of franchising as a proven system for business operation have been repeatedly and consistently demonstrated it is not for everyone. It is the inevitable reality that successful franchising is underpinned by the formulation of and adherence to systems.

The success of franchising is driven in large part by formulaic consistency. This demands that franchisees operate their own business in strict compliance with the franchisor’s system.

Franchisees inevitably renounce a large degree of independence. They must be entrepreneurial enough to invest their own resources - financial and time – in a franchised business but at the same time intrapreneurial enough to operate within the often rigid confines of that franchise.

Of course this is not for everyone.

Franchisors should be smart enough to assess whether the prospective franchisee has the capacity to work within a system (and may use psychological or other testing for this purpose) but the responsibility is ultimately that of the prospective franchisee as the consequences of franchisee failure fall more heavily on the franchisee than the franchisor.

Good franchise systems offer prospective franchisees proven concepts, proven brands, proven systems, proven training and proven support mechanisms which should significantly increase the opportunity for successful and profitable business operation in comparison with independent business operation.

What a franchise system cannot guarantee is that the prospective franchisee is the right ‘fit’ for the business. Good franchisors understand the importance of this and will attempt to ensure that from all perspectives – personality, business affinity, commitment to the business, financial resources – the prospective franchisee fits the profile.

But it is the individual himself or herself who better understands not only their own hopes, dreams and aspirations but also their limitations. 

The ‘yes’ case is probably more true for franchising than it is for most other contexts in which the ‘something for everyone’ claim is made. Franchising is characterised by massive diversity and choice.

There is a franchise for you

In Australia a prospective franchisee has at least 1200 different systems to choose from. Franchising may have been spread by the colonising US fast food systems – McDonald’s, KFC, Pizza Hut – but its influence has quickly spread beyond fast food to, with very few exceptions, all consumer goods and services, most business to business services and, increasingly, professional services.

The diversity is not only in relation to the particular business sector in which the franchise operates. It extends to diversity in the manner in which franchise systems operating in the same industry sector differentiate their offerings and implement their business concept.

But there’s more! There is massive diversity in entry costs, sophistication, size and scale, hands-on commitment and indeed every other aspect of business operation.

Prospective franchisees:

  • have a choice of joining large established systems or small entrepreneurial systems
  • have a choice of acquiring an established outlet or developing a greenfields location
  • have a choice of acquiring the rights to operate a business from a single site or from a territory which can be developed through multiple sites or mobile operations.

It follows from the above that probably there is something for everyone.

The challenge for the prospective franchisee is not the lack of choice but the abundance of it. 

A fast food franchise system faces direct competition from other fast food franchise systems in attracting consumers but at the level of recruiting franchisees each fast food franchise system is in competition not only with other fast food systems but with all franchisors.

Prospective franchisees should recognise this: it’s probably the last time they hold the aces! 

  • this a‚Äčrticle was first published on www.franchisebusiness.com.au

Andrew Terry

Andrew Terry is Professor of Business Regulation at the University of Sydney's Business School and Honorary Dean at Beijing Normal University's Franchise Management School. Andrew has been inducted into the Franchise Council of Australia's Hall of Fame. View More...
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