Thursday, December 7, 2017

FRANCHISE: Benefits of franchising for building business-I

 

By Wambungu Wa Gichohi

Franchising your brand delivers the following benefits;

Paradigm shift-franchisor now thinks entrepreneurially:

The minute you start franchising, your focus shifts to that of BIG PICTURE from that of a technician fixing everything or a manager coordinating everything in the business.

Your brand’s promise becomes your single product, as opposed to the earlier phase where focus was on the individual products sold in each of your company-owned units.

Better operational efficiencies:

Operational efficiencies of individual units are higher in franchising than in a chain of many company-owned units.

This is because the franchisee owns the franchised unit and has high stakes in the success of the business, unlike company employees whose stake in success of the company-owned units is less.

Bulk buying is possible:

The franchisor normally retains the right to supply all inputs, if any, to all the franchised units though other sources are also sometimes allowed.

Economies of scale associated with bulk buying will translate to lower input costs for both franchisor and the many franchisees.

Improved income with less-expenses:

The monthly royalties that franchisors collect from franchised units come NETT of all expenses.

Whatever percentage this is, and although the per-unit return is lower than in company-owned outlets, it is income that the franchisor earns with nearly no cost of sales and at break-even point, the returns overtake those from own outlets.

Wealth creation:

A franchise network is a big army of independent businesses working together in unison to create wealth for their owners and for the economy. You are in business for yourself but not by yourself.

All in the network work to create wealth for themselves, for the network and for the nation!

Commercial diplomacy:

Brands involved in international franchising play a key role in commercial diplomacy, augmenting political diplomacy efforts of their mother governments.

Mess up with Ford, McDonald’s or Coca Cola if you want to see the wrath of the American government!!

Reigning in competition:

Most brands in your business line that started off after yours and are currently giving you competition started off small, operated under the radar for a considerable while and had grown to be worthwhile competitors before you knew it.

Entrepreneurs do not necessarily like building businesses from scratch and if there is an option that would deliver them to business success earlier than a green field operation, they would jump in quickly.

That is exactly what franchising offers.

For you the brand owner, you gain by tapping the energies of many would-be competitors, building a strong army of dedicated entrepreneurs all working in harmony to grow your brand.

While some may opt out at some point, the conditions in the franchise agreement ensure that they cannot start their own competing businesses within a certain radius of the territories you assign them and before expiry of a certain period, thereby ensuring less worthwhile competition for you within your territories.

The writer is a franchise consultant helping indigenous East African brands to franchise, multinational franchise brands to settle in East Africa and governments to create a franchise-friendly business environment.

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