Why Franchising Works
Walk down any street in virtually any city, around the world, and you are sure to see the Holiday Inns, Midas Mufflers McDonald’s, Amoco’s, Pizza Huts, and scores of other franchised businesses that have transformed our lives since the 1950′s.
In fact, franchising of all types is today a pillar of the United States’ economy, generating more than $900 billion each year in retail sales. One out of every three retail dollars spent in the United States is spent on a franchised business. Many businesses are franchised and you don’t even know it and experts predict that by the beginning of the next decade it will increase to over half of all retail sales.
What’s behind the success of franchising? Why does franchising really work? Let’s look a little closer at the many reasons behind franchising’s success.
Group Strength
There is power in numbers. Franchising provides independent businesspeople the large umbrella organization they need to:
- Buy products more cheaply,
- Invest in expensive marketing and advertising programs,
- Fund research and development, and
- Enjoy other benefits derived from the power of size.
Marketing Power
Franchisees, as a group, advertise more efficiently than their independent counterparts.. By pooling advertising dollars, franchise companies can invest in massive advertising programs that place their products or services in front of the buying public. Witness the nationwide advertising campaigns conducted by McDonald’s. Burger King, Hilton and Subway, just to name a few.
Franchisees have the unique ability to share these enormous costs for marketing, advertising and promotion amongst many other individual business owners. This money buys consumer awareness.
It places the franchisees’ products and services in front of more of the consuming public and compels them to buy.
Consistency
Consistency and quality are two more reasons behind franchising’s success from the consumer’s point of view. Consumers want and demand quality goods and services. Advertising promotions calling for: “clean restaurants, consistency without surprises, comfortable hotel rooms, and reliable delivery” are some examples. This type of merchandising wins customer loyalty.
The best franchises ensure consistent, quality products and services by stipulating and enforcing policies and procedures that franchisees must follow to market and present goods and services to their customers. The result? In most cases, consumers feel more comfortable patronizing well run franchises than they do patronizing independent businesses. And that means increased sales and profits for the individuals who own those franchises.
Profit Motive
Finally, and most dramatically, franchising works because it capitalizes on the profit motive. Franchisees are independent business people. They directly receive the fruits of their labor via sales and profits.
As one franchisor, with over 200 locations, tells it, “People work harder when they own their own business. And in this country, the harder you work, the more money you should be able to make. That’s powerful motivation for franchise owners to provide top-notch quality, impeccable customer service and first-class management of their businesses.”
In fact, that’s one of the major reasons franchisers decide to franchise in the first place. Finding quality salaried employees is a difficult task for any company. But when someone owns the business and relies on it for their livelihood, they are much more likely to work hard and carefully guard their own investment.
The profit motive energizes people, like yourself, to achieve. Ownership often provides the incentive franchisees need to overcome challenges, work harder and longer, and achieve success.
