What is Franchising?

post-imageWhat is Franchising? It’s the same old question. Franchising has been around for centuries and has been used in numerous industries. The main problem people in the franchise community face, is the misconceptions others create about the business strategy.
Many think that when you are a franchisee that you are “buying a franchise.”

To be perfectly clear you are investing your assets in a system to use the brand name, operating system and ongoing support. Ultimately every franchisee in the system is licensed to use the brand name and operating system in the way and format specified by the franchisor. In other words they accept the right and the obligation to fully, completely, and consistently implement the Intellectual Property [IP] of the franchisor exactly the ways the franchisor prescribes the IP is to be implemented. And they agree to implement any changes to the IP immediately upon notification of the changes.

What is Franchising? Franchising is one of three business strategies a company may use in capturing market share.

  1. Franchising is a business strategy for getting and keeping customers.
  2. It is a marketing system for creating an image in the minds of current and future customers about how the company’s products and services can help them.
  3. It is a method for distributing products and services that satisfy customer needs.
  4. It is a strategy for building a Brand
  5. It is a strategy allowing a franchisor to simultaneously enter, penetrate, develop and dominate multiple markets simultaneously.

Basically franchising is an alliance strategically planned out among groups of people who have specific relationships and responsibilities with a common goal to have the majority of a market share. Meaning to get and keep more customers than the competitors.
The difference between opening your own business or becoming a franchisee of a brand is, when opening your own business you are independent and when you operate a franchised location you are interdependent.

Franchising is a network of interdependent business relationships that allows a number of people to share:

– A brand identification
– A successful method of doing business
– A proven marketing and distribution system

The business relationship is a joint commitment by all franchisees and the franchisor to get and keep customers.

Legally you are bound to get and keep them using the proscribed marketing and operating systems of the franchisor. To be successful in franchising you must understand the business and legal ramifications of your relationship with the franchisor and all the franchisees. Your focus must be on working with other franchisees and franchisor’s team members to market the brand, and fully use the operating system to get and keep customers.

Other franchisees and company operated units are not your competition. The opposite is true. They and you share the task of establishing the brand as the dominant brand in all markets entered and reinforcing the customers’ familiarity with and trust in the brand. So in this respect you are working as a team with others in the system. Other franchisees share with you the responsibility for quality, consistency, convenience, and other factors that define your franchise and insure repeat business for everyone. Increasing the value of the brand name is a shared responsibility of the franchisor and franchisees.

| By Andrew Erskine