Question

briefly describe the company’s franchise structure which you researched. Suggest one (1) way in which the company could improve its franchise structure to make it more attractive to potential customers.

Answer 1

franchising is based on a marketing concept which can be adopted by an organisation as a strategy for business expansion. Where implemented, a franchiser licenses its know-how, procedures, intellectual property, use of its business model, brand; and rights to sell its branded products and services to a franchisee. In return the franchisee pays certain fees and agrees to comply with certain obligations, typically set out in a Franchise Agreement.

For the franchiser, use of a franchise system is an alternative business growth strategy, compared to say expansion through corporate owned outlets or "chain stores". Adopting a franchise system business growth strategy for the sale and distribution of goods and services minimizes the franchiser's capital investment and liability risk.

As with any business venture, franchising is not immune to risk. But if undertaken in the right way, franchising can be a vehicle of success for both the franchisor and franchise

franchise systems must consider carefully whether a multiple-unit franchising approach is appropriate for their business.

A variety of terms have been used to describe the techniques in franchising known and described below as area development, subfranchising and area representation. The most common of these terms are “multiple-unit franchising,” “multi-tier franchising,” and “master franchising.” Close analysis of these terms indicates that perhaps the term “multiple-unit franchising” is the most appropriate to describe all of these techniques.

The term “multiple-unit franchising” recognizes the common goal of these techniques to establish relationships which provide for the opening of more than one unit. The term “multi-tier franchising” appears to provide an inadequate description because it fails to recognize the distinction between ordinary franchisee-franchisor relationships, which are two-tier in nature, and area development relationships (described below), which are also two-tier in nature. The term “master franchising” could be used to identify the techniques, but may not be the best choice because it describes neither the common goal of the techniques to establish multiple-units, nor the structure of the relationships which are established. Thus, the term “multiple-unit franchising” will be used to refer to the group of techniques identified above.

The common goals of multiple-unit franchising are to establish many units with speed, to leverage both money and personnel by relying upon another person’s resources, and to obtain a local presence. These goals recognize the following potential advantages of multiple-unit franchising:

•   Opportunity for extremely rapid development.

•   Use of another person’s financial and human resources.

•   Shared risk with another person.

•   Opportunity to consult with another person who has certain shared interests.

•   Added source of ideas.

•   Potential for rapid cash flow from sale of multiple-unit franchise rights.

•   Increased local credibility.

•   Increased knowledge of local conditions.

•   Added knowledge of local competition and ability to tailor programs to meet such competition.

Multiple-unit franchising also has its disadvantages, including the following:

•   Loss of control to another potentially-large and powerful–person.

•   Potentially more difficult to manage and lead the other person.

•   “Giving it all away”–a significant portion of the revenue may no longer flow to the franchise system.

•   Vicarious liability for acts by the other person.

Ways to Improve Franchise structure:

1. Balance local customization with network consistency.
   Your operational playbook dictates the use of your brand and trademarks, the execution of your business, and outlines the essential practices to which every franchisee must conform to be part of the network. However, in many areas you have to leave room for the franchisee to be independent so they can adapt to local needs, local preferences, and determine their own success. Your marketing solutions should function the same way: allowing you to have oversight, control, and influence wherever needed, yet flexible enough to allow each location to adjust to the conditions in their market. Never accept a model that doesn't provide that balance.
2. Create a common language.
   One saying I find useful to remember comes from W. Edwards Deming, an expert on business management, who said, "In God we trust; all others must bring data." To overcome the space between the nodes of the franchise network, you need a common language that everyone agrees can be used to communicate. That language should be data. Systems that allow the franchisor to gain detailed insight into marketing performance at each location not only inform the franchisor's strategy, but also can be used to coach the franchisees. When the franchisor and franchisee are looking at the same data about lead trends, paid search performance, customer reviews, and other marketing information, they can hold mutually informed conversations and rely on the empirical information to help guide their activities. A franchisor armed with a summary of the conversion (call to appointment) performance at all locations can use that benchmark to coach a lagging franchisee on how to improve, knowing that the conversation will be based in fact, not hearsay or opinion, thanks to a common data set.
3. Seek out a solution that was built for you.
   Many franchises feel forced to accept software and data solutions that were engineered either for enterprise businesses or small businesses, and haven't insisted on solutions engineered specifically to address the unique challenges of a franchise network. You wouldn't buy clothes that aren't your style and don't fit your build, so don't buy marketing tools that don't fit either. Insist that your vendors demonstrate that their solutions can be governed, controlled, or overseen by the franchisor, yet still be managed, customized, and implemented by each franchise location. Because neither corporate nor franchisee makes completely independent decisions about all of their marketing, neither pays entirely for all marketing efforts, and neither installs, manages, nor maintains all marketing tools, the shared responsibility of the distributed model needs to be reflected in your solutions. Anything less is to surrender to failure because it either places too much burden on the franchisor or further deepens the divide between franchisees and franchisor.
4. Don't overlook adoption.
   Anything worth doing at one franchise location is usually worth doing everywhere. Many software solutions, marketing tools, and reporting platforms boast great features, ease of use, and attractive ROI potential, but most don't include a systematic and automated way to get each and every franchise location on board. Without that, a great idea is nothing more than a costly experiment at a few franchise locations. Insist that your vendors and partners demonstrate a clear methodology to attract the locations to leverage the tools you provide.
5. Round up the rebels.
   There will always be franchisees who embrace the space between themselves and their franchisor as an opportunity to be independent, unique, and proudly stride against the herd. Embrace their individualism and use them as the early adopters of the most comprehensive programs in your strategy. If you can win them over early, the rest of the network will fall in line. If you isolate the rebels, you'll never achieve synergy in the network.