Table of Contents
A franchise is characterized by a business setting in which a guardian organization, commonly referred as the franchisor allows another relatively smaller organization (franchisee) to conduct its business activities in an endorsed method over a period (Zachary and McKenny 2011). Today, franchising has become one of the most common ways of doing as well as developing business. Since the mid-1970s, franchising has experienced tremendous growth to the extent that it is expected to become the main system in which companies will work together in future. Some of the advantages of franchising include giving organizations abilities to open faster, receive achievement status sooner, create a speedy client base, experience fewer hazards as well as become more productive. The present paper is going to discuss the elements that combine to make right a franchise opportunity. However, the paper will first discuss what entails a franchise opportunity.
Five important elements must combine including well-developed business systems, clear leadership, demand for the franchise’s product or service, an effective system for generating sales, and motivated workforce. A franchise must contain all these elements to qualify as a business format franchise. However, most business opportunities are often loosely described as ‘franchise opportunities.’ Other business opportunities are not offered in good faith and are deliberately disguised as franchise opportunities in an attempt to gain good reputation of franchising. Examination of the five elements helps in conclusion as to whether or not a business opportunity qualifies to be referred as a ‘true’ franchise. There are different types of business that fall into a category in which they can become a franchise, including sales agencies, distributorships, and dealerships. Most of these business opportunities do not qualify as franchise because they are characterized by a lack of business system as well as continuing relationship. An organization decides to franchise based on its need to grow rapidly through effective organization operations without having to expand its obligations.
Well-developed business systems
For a franchise to be successful, it has to have well-established and well-developed business systems. Franchises are characterized by franchisor-franchisee roles and competencies. In order to ensure that a franchisee opportunity is successful, there have to be well-developed business systems to enable matching of franchisor-franchisee roles and competencies (Lim and Fraser 2013). The different functions and skills on both sides have to be founded on a platform that will enable them to work together towards success. Such a platform enables both the franchisor and franchisee to contribute positively towards building a strong franchisor-franchisee relationship. However, both the franchisor and franchisee view this business relationship from a different unique perspective. While the franchisor will most likely rely on a contractual arrangement, the franchisee operates from a more personal level. These different points of view affect the roles played by each of these parties and the degree of power and control each party exerts. It is important to have well-developed systems to avoid conflicts due to these different perspectives. In her investigation of the 50 best franchises in the United Kingdom, Jones (2011) has discussed well-developed business support systems like the ones that have contributed to making TruGreen one of the best franchises in the world.
One of the main reasons most franchisees invest into a franchised business is to have a leader who is highly experienced and who can show them direction which to follow. What these franchisees want to avoid is to gamble with whether something will work or not. Therefore, one of the most important elements of franchising is clear leadership. For a franchisee to be successful, he/she has to invest in a business that has an experienced leader and a clear leadership framework. As discussed by Spinelli, Rosenberg and Birley (2004), leadership in any business if the process of constant evaluation and shaping of opportunities while subsequently striking a balance between human, financial, and physical resources that are needed for a business to begin, launch, grow, and become successful.
In discussing the management and leadership issues in establishing a successful franchise business organization, Sherman (2011) observes that the franchisor and franchisee enter into a business relationship with an expectation that the leaders of that particular franchise system will commit themselves to making the franchise successful. They also have an expectation that these leaders will work hard and make continuous improvements and be the role models that envision the goals and missions of the franchise system. Finally, they expect their leaders to share best practices that will drive performance in the franchise system. Franchisees commit their investments on a franchise that is characterized by integrity, transparency, and the absence of hidden agendas.
According to Sherman (2011), leaders in a franchise must possess several characteristics to be able to offer clear leadership and drive the franchise to success. First, the leaders must be compassion. That is, they must portray their deep commitment to the success of the system understanding the premise that the success of the franchise is their success too. These leaders must not only focus on the strongest franchisees, but they must also focus on those franchisees who are struggling. Secondly, these leaders must be effective communicators as well as active listeners. This characteristic will enable them to have a higher ability to inspire and motivate an audience of franchisees, especially when the franchise is introducing changes to the system. Failure to communicate effectively to all franchisees may lead to a fall-out between the franchisor and the franchisees. In addition, they must listen actively to all franchisees and seek both the input and constructive criticism from all franchisees while treating them equally.
Thirdly, these leaders must display business acumen. That is, they must commit themselves to continuous learning of the fundamentals that the business needs as well as the art of franchising. These leaders look to new developments in the market-wide and at the same time be pioneers of innovative methods that will contribute to successful outcomes and competitiveness. Finally, these leaders must take the role of coaches and mentors. As such, they will be accessible team builders who will always care about all the players in the team while helping them to develop their businesses. According to Sherman (2011), these leaders avoid coaching from their armchairs and instead, visit all players. Leaders who possess these characteristics will be able to offer clear leadership that will help discourage conflicts and drive the franchise to success.
Demand for the franchise’s product or service
Just like any other form of business, a franchise needs customers. A franchise characterized by few customers will have low demand for goods and service. Therefore, a franchisee focuses on finding a franchise opportunity that will ensure that there is continued demand for products in a range of geographical locations. Demand is one of the most important factors in a business organization. Franchisees seek to join franchisors who have gained reputation because of their unique products or services. However, the franchisee’s product must have the same appeal to the customers who pledge allegiance to the products previously sold by the franchisor. Therefore, the franchisor seeks to improve the goods and services the franchisee brings in in order to make them have the same appeal as its products. On the other hand, the franchisor can seek to identify the areas in which the franchisee’s products are likely to fare well. The franchisor determines this by identifying their products that match those of the franchisee (Keup, Keup and Keup 2012). Therefore, demand is an essential element that combines with other elements to make a right franchise opportunity. When the franchisor has a well-developed business system, the demand for the franchisor’s products or services will combine with the demand for the franchisee’s goods or services.
An effective system for generating sales
Franchise businesses are known for their popularity as excellent order-takers. Therefore, for a franchise to become successful, it has to show its proven system of generating sales. Sales are not only an essential element in a franchise but they are also one of the key elements in a franchise system. According to Keup, Keup and Keup (2012), an efficient sales process is a must for every franchise system. It is important for a franchise to have a systematic, step-by-step discovery process for its prospective franchise buyers to follow. This process should not be complicated since the prospective franchisees will look for the information the franchisor presents to them in a way in which they can quickly absorb. Some of the methods of sales that a franchise should have include person-to-person sales, phone sales, and sales through other technological platforms.
Excellent customer service is a imperative factor to any business that intends to be successful. Maintaining customers is done through ensuring that these customers are always satisfied. To achieve this, it is important for a business organization to keep its workforce motivated through rewards and training offerings. Training opportunities enable employees to acquire skills and knowledge necessary to provide quality customer service. The American Bar Association (2001) observes that the most efficient way of motivating employees is through training because it will enable them understand their role in the franchise system as a whole. Employees have to be motivated in order for them to feel that they are contributing to the mission of the franchise. Therefore, franchisees must ensure that it continually engages its workforce.
As indicated earlier in ‘well-developed systems’ section, Jones (2011) has discussed well-developed systems as one of the primary drivers for success in TruGreen. The second success factor that has been discussed by the author is an experienced workforce. According to Jones (2011), TruGreen has an extensive and well-developed training program for its workforce. In addition to this, employees receive regular visits from the operations network manager who ensures they are feeling motivated. In addition to regular visits, the franchise has an internet forum and regular network meetings and conferences which enable a high level of employee support and idea-sharing between franchises. TruGreen example provides evidence that a motivated workforce is an ingredient for a successful franchise.
Nedelea (2013) has extensively discussed ways in which a franchise can keep its workforce motivated, including employee orientation, workforce engagement, positive work environment, job enlargement, initiative and recognition awards, and developing skills. A franchise is relatively different from other types of business settings; therefore, it is necessary for the franchise to conduct employee orientation programs in order to ensure that employees are satisfied from the beginning. Most often, business organizations, including franchises, ignore the role played by employee orientation. Employee orientation ensures that future employees’ expectations are realistic and that new employees do not join the franchise with expectations that the franchise cannot reach. Employees’ positivity fosters an environment in which employees encourage each other, give positive feedback, avoid micromanagement, and give constructive criticism. These factors provide an environment in which employees not only survive but also thrive (Nedelea 2013). One of the greatest motivational factors is rewards and recognition. Motivational incentives and rewards characterize successful franchises. A franchise that does not recognize the effort exerted by its employees towards the organization is bound to be unsuccessful or uncompetitive. Such employee recognition translates into franchise recognition.
For most franchises, the five elements combine to make ‘right’ a franchise opportunity. However, these elements combine extremely well for some organizations than others. Also, there are some combinations of two or more elements that will lead to more success compared to other combinations. For example, well-developed business systems combine well with all the other elements in producing the best franchise opportunity. A franchisee seeking for a franchise opportunity is likely to consider a franchisor that has a well-developed system to commit his/her investment. No franchisor will want to commit his/her investment in a franchise in which he/she identifies a weakness in its system because it this will translate into a lack of effective leadership, ineffective workforce, and an ineffective system for sales generation. Although some elements will combine well with some franchise opportunities, all the five elements are equally important for any franchise.
- American Bar Association. 2001. Fundamentals of International Franchising. New York: American Bar Association
- Jones, E. 2011. 50 Fantastic Franchises!: The UK’s Best Franchise and Direct Selling Opportunities for Start-up. Hampshire: Harriman House Limited.
- Keup, P., Keup, P. and Keup, E. 2014. Franchise Bible 7/E: How to Buy a Franchise Or Franchise Your Own Business. Irvine, CA: Entrepreneur Press.
- Lim, J. and Frazer, L. 2013. Matching Franchisor-Franchisee Roles and Competencies, Griffith University.
- Nedelea, A. 2013. Strategic Tools and Methods for Promoting Hospitality and Tourism Services. Hershey: IGI Global
- Sherman. A. 2011. Franchising & Licensing: Two Powerful Ways to Grow Your Business in Any Economy. AMACOM Div American Mgmt Assn.