Why fear franchising?
The franchise industry is growing, as is evident by the market reports and statistics. Still, there are many traditional or unorganized Brand owners in the market, who are not ready to embrace franchising. But why? What holds them back?
Time and again, prospective franchisors say that the only thing holding them back from franchising their business is the fear that franchisees won’t sustain the quality standards they’ve established. Commonly I hear people saying, “I’ve worked too long and too hard building this brand to let someone else spoil it.” The reasons are multiple, from unfounded fears of brand dilution factor to sharing secrets of trade, brand positioning, etc. Today over half the brand owners of Purani Dilli dream of having stores next to Bikanervala stores pan-India, yet lack the courage to dive into the waters of franchising.
|Gaurav Marya, President, Franchise India, is an authority on Franchising, Licensing, Retailing, Real Estate and Marketing. his company has serviced over 600 prestigious brands in the past few years through media, advisory and exhibitions.
A majority of the big-wigs of the unorganized and traditional brands hesitate to take up franchising because they are confounded by the fears of failure, seeing many brands fail. Besides personal misgivings, there are the alarmist reactions of family and friends. Another factor: they confuse the ultimate quality of the product with the quality of the operation. What an entrepreneur ultimately fears is loss of control.
On one side, they dream of making it big and on the other, they have the fear of failure. Even after years of establishment, it’s hard for traditional brands to take the success laden road of franchising. Lack of awareness and any formal insight into franchising are the primary reasons for this hesitation.
Fruits of franchising
The unorganized players in the industry are unfamiliar with the fruits of franchising. A few of the brands who fall under the unorganized umbrella can also relish success.
As a franchisor, one of the biggest fears is that they cannot fire a franchisee or his employees simply because they don’t like the way the franchisee runs a unit, unlike a manager who can be terminated immediately. But what the franchisor often does not realize is that he has a tremendous amount of power over the franchisee. With a franchisee, poor performance can lead to the loss of his entire franchise investment and sometimes his home, lifestyle, retirement plans etc. The franchisee is therefore not only committed, but also motivated to excel, as the rewards for strong performance far exceed the rewards associated with managing a business.
From a franchisor’s standpoint, there are four pillars of long term success in franchising:
• Selecting the right franchisee: Quality starts with right franchisee selection. The best franchisors award franchises only to well-qualified candidates, and decline the rest. While on the face of it, it may seem that franchisor has sacrificed large fees and royalties he might have obtained from those rejected, but in exchange, quality is maintained.
• Training of the franchisee: Training is as important as franchisee selection when it comes to maintaining the brand. The best franchisors routinely provide the most—and the most comprehensive—training to their franchisees.
• Ongoing Support: Whether it is field support, frequency and length of site visits, advertising, purchasing, public relations, technology, etc. it should not be skipped by franchisors as it will contribute to both higher-quality and more profitable franchisees.
• Compliance: Finally, the franchisor must be committed to compliance with the franchise’s systems and standards. While the franchisor cannot fire franchisees the way that he or she could fire an employee, a well-crafted contract will grant the franchisor the ability to terminate a non-compliant franchisee. From a quality-control perspective, the question isn’t whether a franchisor can enforce these standards, but rather if the franchisor will. Enforcing standards, when done from day one, can be relatively painless, but it must be done.
Franchising is about mutual commitment. For a good franchisee, that commitment comes naturally. For the franchisor, it comes at a price. But franchisors who are willing to pay that price will find their ability to build a quality brand greatly enhanced.
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