Dissecting the franchise business model

(5 minute read)

A brand’s franchise model can make or break your decision to invest in a franchise – and if you’re a franchisor, the format of your franchise business model can contribute to the successful growth of your franchise network.

Each model breaks down the brands operational structure, costs, revenue streams and resources available to the franchisee and are typically proven business models that give your business a greater chance of success.

And so you think that you've identified a franchise business model that's right for you. Now what?

Deep breath. There’s a step-by-step approach to starting your journey into franchise ownership, but we’re going to focus on breaking down the pieces of the franchise model that you’d need to look at during your search. Here’s what we’ll be exploring:

  • Brand recognition & industry reputation
  • Support and training
  • Marketing and advertising
  • The franchisee network

Let’s get our teeth into it…

Brand & industry recognition

A franchisors brand is their most valuable asset.

It sets the foundation for a franchisee’s success, as the goods or services which the brand provides are well established and renowned. Before you’ve done anything other than identify the brand you wish to operate under, some of the groundwork is already done. Your customers (and in some industries, prospects) know your products and what to expect from you, and so it’s now your responsibility to deliver on that brand promise and ensure each customer wants to come back.

Access to loyal customers

Such a beneficial part of operating under a franchise is the foundations that the franchisor has built for your business.

Fancy a pizza? Domino’s or a Papa Johns perhaps. Vehicle cleaning? What about Autosmart?

A brands reputation and positioning inside the mind of their desired audience can create immediate associations once the demand has been created. Established franchise brands already service this demand, which gives you access to a wealth of customers. Now, they may just require something local to them.

Measure the cost versus brand power

Will the brand power alone guarantee you business? Is it worth the initial outlay? Can you afford it?

Like all business ownership, a franchise business requires hard work and dedication towards success; but if the power of the brand you operate under is reputable and successful within its sector, you’re got a big advantage from the get-go.

As a prospective franchisee, you’re investing heavily in the brand to help you achieve success. While the costs of investing in a franchise need to be considered (can you afford the initial costs to launch and operate the business?), the initial outlay (think more franchise fees rather than start up costs) can sometimes reflect the financial opportunity of operating under the brand.

Do not take this as a given, though. Thorough research into the whole process will help you to create a deep understanding of the size of the opportunity and whether it is a viable and suitable option for you. Operating under a large franchise brand may not match your business ambitions and goals, and there’s nothing wrong with that! Franchising caters to so many business owners, and there is a process you can follow to help you identify your journey into franchise ownership.

Franchisee support and training

Training franchisees and the staff effectively is critical to the success of a franchise. Look closely into how the franchisor plans to prepare you for the demands of the business opportunity and launch. To ensure you fulfil your potential, a franchisor should incorporate effective support to help guide you through the complexities of setting up a franchise in your chosen location.

Many prospective franchisees come into business ownership with very little experience, some with none at all. That, however, does not mean you won’t be a successful franchisee. If you need some help evaluating your skills and suitability, our digital resource pack for franchisees contains a skills checklist that can help you crystallise these thoughts.

In the meantime, here’s a few things a franchisor should help you out with:

Finding and setting up a franchise location

For many franchisees, a franchise location is important as they could be a) connected to the area and b) its positioning can determine the scale of their success. The franchisors should (and likely will) have the expertise and experience to help source your base and negotiate the price and terms of your lease.

Ask the franchisor how involved they are in this step in the process. Ask an existing franchisee. Do your due diligence, and if they are as committed and invested into optimising your opportunity as you are, you already have a head start.

Franchise Operations

A requirement of the franchisee to operate under the brand name is to follow the tried and tested franchise model to the tee. After all, that is what you invested it.

One of the most in important documents you’ll receive is the franchise operational manual. Inside it, you could find:

  • Manuals and instructions for equipment the franchisee will need to use
  • List of approved suppliers
  • Staff hiring, training and motivation guidelines
  • Health & safety regulations
  • Brand management and visual branding protocols, ethical marketing and sales practices
  • Tools and practices for managing finances
  • Audits, compliance and monitoring practice
  • Procedures for managing complaints and grievances

The franchise operation manual should be your go-to guide on the what and how you will run your business. The greater the level of detail inside the one you’re given ensures there is little to no animosity about how to run the business well and in line the brands requirements.

Marketing and advertising your franchise

How active are your parent brand online?

What resources and relationships already exist which can you leverage to promote yourself locally to your target audience?

The level of support does vary from franchisor to franchisor. Some may simply assist you with recommendations for local media opportunities, others may support you with better rates for advertisements and give you insights into what has worked best for other franchisees.

You can look directly at the work the brand is doing themselves. Your business will benefit from all the work that the brand is doing in the public eye, putting your business in the forefront of consumers’ minds. Their promotional activity is yours too.

The franchisee network

How big is the franchise network? How are their relationships with the franchisor? How’s their experience operating under the franchise model?

The franchisee network will be filled with likeminded individuals, developing similar skillsets, following the same processes and maintaining relationships with the same franchisor. Talking to them can give you invaluable insights into working under the brand and tie together all the pieces of the franchise model to show a clearer, more realistic understanding of how the business is run.

Social proof in all business is vital for building trust and confidence in a brand. So when you have an opportunity presented to hear the real stories of franchisees, you will be able to get a better gauge on whether this is the franchise model for you.

What matters to you?

So, we’ve broken down the steps of what makes a successful franchise model. Each franchisor’s model will be different, placing more emphasis on some parts more so than others.

And you may place emphasis on some places more than others too. What’s important is that the franchise model suits your strengths, weaknesses and provides the value that you’re seeking from investing in the franchise opportunity over starting a business on your own.

What part of the franchise model do you value the most?