Any company expanding its distribution structure will have to invest money and resources. Franchising provides a mechanism to accommodate the expansion of the distribution network without employing as much of the company’s capital. The company will in turn have to forfeit certain margins to ensure a business case for franchisees. Franchising is also a powerful way of establishing a culture of ownership at distribution level. The essence of franchising is that efficiencies are maintained because the franchisee feels all profits or losses at the distribution point.
IS FRANCHISING MORE SUITABLE FOR SPECIFIC INDUSTRIES?
Franchising is suitable in most retail and service industries, provided that the scale of the operation can still be defined as a small business and that the intellectual property employed is not too specialised.
Any business where operators require formal tertiary qualifications like accounting firms and medical practices aren’t popular as business format franchised systems.
WHAT IS THE MOST IMPORTANT PART OF THE FRANCHISE DEVELOPMENT PROGRAMME?
The recruitment of franchisees remains the most important aspect. Making the wrong decision during the franchisee recruitment process will have long lasting and costly implications for the franchisor. Franchisees who aren’t 100% dedicated and committed to the business or who don’t have the necessary aptitude to run a business will require intense support from the franchisor. This support is an expensive part of the structure of any franchised system.