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A franchise system can be heaven or hell

devil-businessman-business-evil-naughtyAll retail franchises have the potential to be successful retailers, but not all retail concepts are franchiseable (if that’s a word).

The reason for this falls into one of two categories; one relating to the individual(s) who seeks to become a franchisor, and the other relating to the business model that is being franchised.

The business owner

To become the franchisor, the (original) business owner must make a significant shift in thinking. A retail concept is by nature about serving consumers in some way. A franchisor makes the move out of retailing into the world of B2B marketing.

You may have built a successful store based on your ability to find and meet consumer needs, but when you start franchising, you don’t sell product (kebabs, shoes, coffee) any more but you are selling businesses to prospective owners.

Everything is different: the metrics, the market, the skills required, the strategies, the decision making – everything. The ‘successful’ retail concept is one small part of the equation. That is why there can be multiple successful coffee shop franchisors where the product isn’t all that different, but the total solution that the franchisee buys into can be greatly different.

In fact, (prospective) franchisees will do well to remember that franchisors are not even in the same business as they are, so expectations must be adjusted accordingly for the relationship to flourish.

The concept

For a retail concept to be franchise ready it needs to lend itself to certain criteria.

It must be able to be systematised. (People mistake a process for a system, but that is another topic.)

In must be in a space where brand power matters, because the brand is a big part of what the franchisee buys.

Constant innovation allows the franchisor to continuously tweak the model, and this flair is an important success requirement. People who buy franchises are very often cautious and conservative and constant innovation is an opportunity for a franchisor to continuously add value in a way that is appreciated by the franchisee. (Some franchisees develop an entrepreneurial streak and may end up being a multi-unit franchisee or may leave the system; so I am speaking generally.)

Prospective franchisors (starting a franchise system) and franchisees (buying a franchise system) will do well to think about these things because these four factors are the difference between a match made in heaven or hell.

Source insideretail.com.au

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