Being a franchisor: an exciting journey… but also a huge challenge
Today, being a franchisor is an amazing adventure!
This is assuming you have an entrepreneurial spirit to manage and lead a brand and its expansion on a specific market. Being a franchisor it’s also being your own boss and having the freedom to settle the business model you want and truly believe can be successful. In the end, it’s having the possibility to test different models and learning which one suits you best. In a nutshell, it’s having the chance to be independent and to manage a business just as you want!
But it is also a path full of pitfalls …
Because you have a brand to manage and a network to expand: you are the one that needs to focus on ongoing business expansion and innovations by being responsible of staying ahead of the competitors (product update, competition benchmarking, industry trends, etc.). That means making adjustments all along the path you will take and constantly self-analysing yourself on what you have been doing for years. You are also in charge of recruiting the franchisees that will join your network and that will count on you to help them from the very beginning, to their daily issues 10 years after they join the franchise.
This last point could be one of the biggest challenges you will be confronted with regarding convincing potential franchisees to join your network. As of that, what can you offer them compared to the other franchisors? And how can they be sure that, by joining you, they will enter into a profitable business and benefit from the help you offer them? You are among thousands in a year to offer them the possibility to become a franchisee, so why would they choose you? Specially, if your brand is not on the top 10 of the most known and reassuring ones. How to compete against the McDonalds and other franchises in this world?
On the other side, being a franchisee: a tremendous investment
On the franchisee’s side, it’s also a risk taking experience. On one hand, because of the huge investment needed at the beginning. The prices differ a lot from one sector to another and within an industry. But, in general, for example a restaurant chain, prices can go from 50,000€ up to 200,000€ in initial costs. Gym chains can also be very expensive from 20,000€ up to 300,000€ because of the facility costs and the relatively big space needed. On the contrary, real estate agencies can be cheaper from 10,000€ up to 130,000 € for the biggest franchise. The automotive industry is also quite cheap compared to the others from 15,000€ up to 50,000€ and very varied: car washing, renting agencies, car dealerships, etc. To that investment (personal contribution, admission, formation fees, stock, etc.), you need to add royalties on your sales and on advertising every year (usually a sales percentage going from 1 to 5%).
All this represents a huge amount of money that they can’t have back, even after a high activity year, turning out to be frightening for someone who wants to become a franchisee.
What is more, many things remain unclear before starting as a franchisee: is it worth taking the risk of going for an unknown business, associating oneself with a franchisor who can significantly influence the network in many different directions? What is more, what guarantee do they have that being associated with one franchise is a better idea than being associated to another one?
Other questions remain pending: what is really offered by the franchisors? Equipment, formation, help? What communication will you bring them? And the most important: is the localisation you offered a really good one? Because that remains the success factor number one for most industries.
In the end, the offer they are facing is huge: there are dozens of websites presenting all the franchises they can take part in, many fairs gathering you and the rest of the franchisors claiming that joining this precise franchise is the best investment they will make in their lives. Then, how to outstand from the competitors?
To all those questions, what proof can you give them? And then how can you take away insecurities and doubts from your potential franchisee? And win their trust by proving them that it is worth becoming a franchisee with you and no one else? For that purpose, showing them objective proofs of how you succeeded and how they could succeed too, thanks to objective data, would be a huge benefit especially regarding localisation and sales forecast.
In the end, a franchisor needs to be a real adding partner
By being an added value partner from the very beginning offering them: training programs, opening support, the purchasing power you have with suppliers, etc. By providing them ongoing support (dealing with daily issues), by creating a franchise marketing program, explaining them how the royalties they give you are used to rise the brand awareness (and therefore their sales).
And the most important part: by reassuring them about the insecurity they feel about location and sales forecast. Here, it would be interesting to be able to analyse an area the franchisee considers interesting or that appears to be a good one according to you.
Below is an example of the kind of information you could have using a Location Intelligence tool, choosing to analyse 29 Union Street in Birmingham. Gathering information about the area, such as population, its income, the household structure, the traffic and the weather. If you dig deep down into each category, you can have even more precise data about each section: population structure, marital situation, education level, crime index, house type and occupancy, pedestrian traffic street by street, etc.
10 minutes walking area analysis in Birmingham center
If you have a best performer within your points of sale portfolio, it would also be interesting to replicate the external success criteria of this location to find other similar areas in which to implement a new franchise. Thus, ensuring that, the profile of those new areas will match the one of your franchise’s ideal profile. Below you can see the areas in England that have the same population structure, the same income and the same commercial activity as the one we selected in Birmingham. In this example, if you have a franchisee performing extremely well in Birmingham and you want to open a new one having the same chance to become successful, you can analyse the locations proposed by the application. Indeed, those locations, will match your performing criteria, therefore increasing its chance of success.
Thus, a quicker opening with reduced risk of failure is possible thanks to the application.
Top 50 of the areas with the same external criteria as the first one
This Location Intelligence analysis will also help you forecast the sales of an opening to reassure your franchisee of the potential return on investment, predicting future revenue and sales growth on that precise area.
Sales forecast of one potential location
All these analysis are based on Big Data, business intelligence analysis and advanced techniques of machine learning. Although performing all those analysis might sound daunting, they can easily be managed even for non technical background profiles thanks to business intelligence solutions such as Geoblink. Indeed, this application helps franchises with their expansion strategy or the optimisation of their existing network. It provides advanced Location Intelligence functionalities and geolocated data (such as sociodemographic, socioeconomic and pedestrian traffic volume) wrapped up in a user friendly interface. Thus, you can convince potential franchisees by downloading reports with hard data to back up your analysis and you can be quicker on scaling your franchise network.
Geoblink is already helping on that purpose franchises such as Amrest (Burger King, Pizza Hut, KFC, Starbucks), Toyota or BasicFit. If you want to know how, reach us here.