Franchising Provides Owners With a Proven Model and Opportunities to Evolve the System The value of owning a franchise is the operating system.
By Rick Bisio Edited by Anna Wahrman
Opinions expressed by Entrepreneur contributors are their own.
One of the major differences between joining a franchise system and inventing your own business is the degree of independence and control enjoyed by the owner. There are pros and cons to both, and most people seem to have an opinion about which system is better. Both approaches have merit — which is best depends mostly on the preferences of the individual and what they want to put into and get out of the business.
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The basics of owning versus franchising
Independent owners create every aspect of their business. Through trial and error, the independent business owner builds an operating system that allows the business to successfully attract and retain customers. This includes everything from building the business to marketing it, as well as identifying or creating systems for inventory, the website, social media and all other aspects of the business.
Franchise owners, on the other hand, don't have to invent the operating system. In a proven franchise system, all aspects of the operating system have already been tested and proven by the franchisor. A business operating system has been established by the franchisor to accelerate the franchisees' ability to create successful businesses. In fact, the system is part of what the owner is buying when joining the franchise, and the franchisor has the right to ask them to follow their system.
As a franchise coach, I ask people what they believe they are purchasing in a franchise. A lot of people will say they are buying the brand or the system but believe they get to own the product. That is not the case. They do not own the product or the company's trademarks or logo. A franchise is a license, and the franchisee buys the right to use the franchisor's business operating system within the exclusive territory as defined in the contract.
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The benefits of the system
Some people have said to me that they want to get involved with a great, proven franchise but they don't want to be told what to do. New franchisees need to realize that the value they get from owning a franchise is the operating system — and they should want to follow the system.
Having that system in place is extremely beneficial in the early years of owning a franchise, because in order to run a successful business, the owner doesn't need to determine what products they will sell, what equipment they will use or what kind of media messaging and company branding they need to reach their target audience. That is all put in place by the franchisor, and it is very helpful for the franchise owners.
An important part of franchising is having a system to help guide its owners, but franchisees do have some control in how to run their business, and they can often tweak the system to improve its operations. The franchisor provides guidance, but the day-to-day operations are the responsibility of the franchisee.
Under the joint-employer ruling, individual franchisees can hire and fire their employees and determine their work schedules and pay. That gives franchisees greater control over who works at their establishment and has a direct impact on the success of the business.
Many times, pricing varies in different parts of the country because markets are different and the decision of what to charge the customer is determined by the franchise owner. One example of this is the McDonald's breakfast menu. Several years ago, McDonald's responded to customer demand to have items like Egg McMuffins and sausage biscuits available beyond breakfast hours by introducing an all-day breakfast menu. The company discovered that the popularity of certain items varied by location, so it might not make sense to have every single breakfast item on every single menu across the country. In 2019, the chain announced it would let its franchisees determine which breakfast foods to serve all day.
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Franchise systems respond and evolve
As franchisees become comfortable being part of the system, they may become more inclined to suggest or try something new. If a new idea from a franchisee is successful, the franchisor may recognize it and even incorporate it into the rest of the system.
Subway's "Five Dollar Footlong" promotion, which included a discounted price for the 12-inch sandwich and featured a catchy advertising jingle, kicked off during the recession in March 2009 and was an immediate hit since many customers were experiencing tight financial times. Sales increased 25 percent during the first two weeks of the promotion, and it generated $3.8 billion in nationwide sales by August of that year.
Despite having a team full of talented advertising and marketing professionals, the idea for the campaign did not come from Subway's corporate office. It originated with a franchisee in Miami five years prior as a way for his restaurant to boost sagging sales on the weekend. It became an instant success and caught the attention of the franchisor, who later implemented the special across all locations.
A quality franchisor is always looking for ways to improve the system, and having the input, feedback and suggestions from the franchisees' experiences is one important way to do that. It's a constant process for the franchisor to bring all of the franchisees' experiences together, incorporate them into the operating documents and share them with the other franchisees for the benefit of the whole system.
