Expressed opinions Entrepreneur Contributors own.
Independent business vs. franchise
Franchising is unique in that its business model relies on systems to function properly. A business opportunity that is not a franchised operation is not the luxury of a structured operating system set up by a parent brand that provides ongoing support. The components of such a system include an operation manual, training, continuous support and a secure area for doing business. Franchisees are based on an exchange – a fee that gives the user rights to all trademarks and systems of the franchisor. They require strict adherence to the rules and regulations set by the franchisor. Some entrepreneurs are suitable for franchising, but not everyone agrees with the bill. If you like order, structure and reliability of systems and methods, you will improve through franchising. If the rebels who march to the beat of their drums? Not too much.
Related: Here are 6 ways to stay in a franchise system that helped me survive Covid-19
Good system allows for multiplication
The magic behind a successful franchise is the proven business model. Perfect over time to optimize all aspects of running a business, the model serves as a roadmap for the franchisee to achieve success. A proven system is something that can be replicated elsewhere – the very livelihood of the franchising concept. In addition, franchisees are companies that rely on proven systems to multiply activities elsewhere. According to Mark Siebert’s book, Multiplier model, Sibert educates readers that well-built business systems and processes give franchised companies a fair amount of control and scalability. To those franchise brands who do it best, what Sibert describes is a “system mentality.”
Related: Why opening a franchise business is better than starting your own
Calculate the financial potential for success
Franchised systems are set up to buy with an initial fee, but there is also a monthly royalty payment, usually between 4-10% of total sales revenue. So, if you are interested in determining the suitability of a business model for franchising, the calculation of any potential ROI should include a potential breakaway period, including a market-rate salary for owner-driven business management.
Examples of franchise systems in action
Inside Multiplier model, Siebert explains that the operation manual is at the heart of any successful franchise system. The cover includes details about the role, responsibilities, collection, operating system and how the business will be supported by the brand. Training is another important element of a successful system. Some franchises go all-out, providing “university” style onsite training that lasts for a few days or weeks. After the training is over, another system – running support – starts. Many franchises have detailed plans for the grand opening process. Some hire a franchise development representative for new franchisees, others set up onsite visits to check franchise progress. Another system that should not be overlooked is the advantage of having a peer network of other franchises in the system, all of which have a shared interest in maintaining successful operations for the brand.
Collectively, all of these systems are designed to manage and maintain the day-to-day operations of the business for the franchisees in the system. These systems have been refined over time, setting the stage for continuous efficiency in the franchisor’s operations. Ultimately, these systems will create value for franchise customers. The end result, according to Seabert, is “higher than the standards set by competitors.”
Franchise systems are the lifeblood of the business model. The advantages are many, but in one form or another, these systems contribute less risk, cost and resources to the operation of the business. These systems are the backbone and a roadmap, designed to help individual franchises become successful accolades of powerful franchise brands.
Mark Siebert is the CEO of iFranchise Group, a leading franchise consulting firm and author of The Multiplier Model. Buy it now from Amazon or Burns & Noble.
Related: Aspiring Entrepreneur? Consider perfecting something already made