Measure Up to These 5 Standards and Watch Your Franchise Business Skyrocket Here's a breakdown of what a franchise is, what it isn't and how to build a successful one.
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An entrepreneur who is launching a new business is confronted with many different business decisions. For many, becoming a franchised business is a long-term objective. For others, buying into a franchise is more desirable.
Others may not even have franchise operations in their lexicon, much less on their radar. Many do not understand even exactly what the franchise model is and the growth it can offer. Let's clarify what a franchise is, what it is not and what matters most to their operations.
Franchises are not chains
Franchises are often confused with chains. It's an easy error to make because both represent brands that are found in multiple locations. For consumers, the difference between a "chain" and a "franchise" rarely matters. However, first-time business owners really need to understand what a franchise model is, and importantly, how it differs from other business models.
While "chain" and "franchise" are terms that are sometimes used interchangeably, even in the business press, there are major differences between the two. In a chain business, a corporate parent company owns all of the business' locations. In a franchise business, each store location is owned and operated by separate individuals.
Many of the iconic chains that evolved into franchised operations include Kentucky Fried Chicken, Carvel, Arthur Murray Dance Studio and of course, Dunkin Donuts, Burger King and McDonald's.
Franchise business models can be traced back to 16th century England, and commercial franchising's beginnings in the U.S. started with the expansion of Benjamin Franklin's Philadelphia printing enterprise to South Carolina. However, it was not until the mid-20th century that an increase in branded products and services sparked the incredible growth of franchise businesses.
Today, the ability of an individual to "buy into" a successful brand is what franchised business models are all about. But, the decision to expand a business via franchising is not an easy one to make. However, it comes down to three constants, as noted by the International Franchise Association: the desire to expand, the limitations on human and financial capital and the need to overcome great distances.
The bottom-line decision about whether to franchise a brand often comes down to financial capital resources. But, at the very next layer is the ability to build and maximize infrastructure for expansion and that ability should focus on standardization.
How to make a franchise business model work
If an entrepreneur is to make a franchise business model work, the first step is to develop a business system for its franchisees and make it central to the franchisee offering. Why? First, a codified system ensures that the franchisor can maintain control over its franchises, and thus maintain what its brand represents. And second, customers visiting a franchised business in one location rightfully expect the same exact experience at every location they visit.
Once the business system is in place, there are many facets to making it a successful operation for both the entrepreneur/franchisor and the franchisees. However, when I'm asked for my "elevator speech" on how to ensure success, I say to concentrate on standardizing as many elements of the operation as possible.
Consistency is key
Why is this my most important advice? Because the best thing a franchisor can do is to do everything in their power to ensure consistency. That's the best way to establish and maintain the brand reputation that members of the public — and employees and vendors — demand.
The hope is that by establishing a set of standardized procedures, franchisees will provide a consistent experience to customers in each and every location. That's how to build trust and loyalty among customers, who rightly expect a consistent level of quality and service wherever they see the name.
Think of how bad it would be for a huge franchised brand like McDonald's if a New Yorker visited a Los Angeles location and had a wildly different experience — they might never try another McDonald's outside of their neighborhood again, would warn friends and family and would likely discuss their negative experience on review platforms and social media.
Standardized procedures can also make it easier for franchisees to operate their business because tried-and-true processes reduce the risk of errors and improve overall efficiency. Getting even granular, standardized procedures can help franchisees adhere to legal and regulatory requirements, reducing the risk of non-compliance and legal disputes.
I recommend starting with these five elements to build the franchise procedures that we've found to be crucial for building a strong, reliable and successful franchise business:
- Comprehensive operating manual: it almost goes without saying, but is often overlooked. It is essential to create complete documentation that provides guidance for franchisees and their staff to function correctly and efficiently. In writing, it must document the franchisor's own specific standard procedures for performing operations safely to produce goods and provide services.
- Identical technology: The franchisor should provide all the brand's proprietary technologies deployed to support the operation. For example, franchisees of a restaurant brand that was built on robotic technology — like self-service kiosks — must be able to provide an identical guest experience at each location.
- Uniform brand identity: Every franchised location must look and feel like every other location. That means the franchisor must mandate that each branding element is precisely the same, including the company name, logo, graphics and images, color scheme, typography, tone and voice.
- Templates for marketing and advertising: Similar to the importance of mandating a uniform, brand identity across all franchisee locations is required marketing and advertising templates, developed by the franchisor. The only thing that should differ in marketing materials from location to location is the address and telephone number. A note on social media for franchisees: Once again, it is paramount to emphasize brand identity, provide templates and create clear social media policies that protect the franchisor from any legal issues that could occur in a social media crisis.
- Training: It is impossible to underestimate the importance of training. Franchisors are eager to teach their franchisees how the system works, because that is how to ensure operational success, both at the outset and ongoing because as the brand grows, the system may change.
With financial and human capital and attention to every detail, franchises have excellent odds for success. According to the U.S. Bureau of Labor Statistics in its entrepreneurship report, "It's generally accepted, because of their established, proven business practices, that franchises have higher success rates than independent businesses."
The difference between a successful franchise business and a failed one is in how well the entrepreneur has standardized processes to make the product or offering consistent across locations and platforms. While entrepreneurs are rogue by nature, the franchise business should be anything but.