๐Ÿณ ๐—–๐—ผ๐—บ๐—ฝ๐—ผ๐—ป๐—ฒ๐—ป๐˜๐˜€ ๐—ผ๐—ณ ๐˜๐—ต๐—ฒ ๐—™๐—ฟ๐—ฎ๐—ป๐—ฐ๐—ต๐—ถ๐˜€๐—ฒ ๐—•๐˜‚๐˜€๐—ถ๐—ป๐—ฒ๐˜€๐˜€ ๐— ๐—ผ๐—ฑ๐—ฒ๐—น ๐—–๐—ฎ๐—ป๐˜ƒ๐—ฎ๐˜€

Perhaps you are considering leaving your corporate career to go into business for yourself, or starting a venture part-time while you transition out of that career or are contemplating a move to the U.S. to invest via the E2 visa program or have graduated college and donโ€™t want to work in the corporate world.ย  All are valid reasons to reflect upon franchise ownership.

ย Letโ€™s talk basics. Aย franchiseย location is a type ofย businessย that is operated or managed by an individual(s) known as aย franchiseeย using the trademark, branding andย business modelย of a franchisor. In this business model, there is a legal and commercial relationship between the owner of the brand (franchisor) and the individual (franchisee).

ย In essence, a franchisee pays a franchisor an initial fee and ongoing royalties.ย  The franchisee, in return,ย gains the use of a trademark, the franchisorโ€™s ongoing support, as well as the right to use the franchisorโ€™s business system and sell its products or services.

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The business model for each franchise concept is different and you will need to evaluate it as part of your due diligence.ย  What exactly does it encompass?ย  Many componentsโ€ฆ

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๐—ฉ๐—ฎ๐—น๐˜‚๐—ฒ ๐—ฃ๐—ฟ๐—ผ๐—ฝ๐—ผ๐˜€๐—ถ๐˜๐—ถ๐—ผ๐—ป

From a customerโ€™s perspective, they not only want to know how a product or service is different from the one they may already be using but also what value it has for them.ย  Is it able to improve upon or replace the current product or service and are they receiving the best possible deal?ย  From the potential franchiseeโ€™s perspective, the value proposition differentiates the brand from competitors.

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๐— ๐—ฎ๐—ฟ๐—ธ๐—ฒ๐˜ ๐—ข๐—ฝ๐—ฝ๐—ผ๐—ฟ๐˜๐˜‚๐—ป๐—ถ๐˜๐˜† ๐—ฎ๐—ป๐—ฑ ๐—”๐—ฑ๐˜ƒ๐—ฎ๐—ป๐˜๐—ฎ๐—ด๐—ฒ

When considering any business, you need to define customer segments that share common characteristics that meet your demand. These characteristics can be “hard” variables such as age, gender, location of residence, level of education, occupation and revenue level, or “soft” variables such as lifestyle, attitude, values, and motivations for buying.

Hard variables can help estimate the number of potential customers a business can have. For example, for an after-school STEM/STEAM program, you should know how many school age children reside in the territory and birth rate estimates for upcoming years.ย  Soft variables can help identify motivations that lead to purchasing decisions including price, prestige, convenience, durability and design.ย  For the same after-school STEM/STEAM program parents want to help their children to perform better academically and improve scores to be better able to attract college scholarship money or attend the desired university.

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๐— ๐—ฎ๐—ฟ๐—ธ๐—ฒ๐˜๐—ถ๐—ป๐—ด ๐—ฆ๐˜๐—ฟ๐—ฎ๐˜๐—ฒ๐—ด๐˜†ย 

In order to offer a product or service successfully in the market and meet audience demand, evaluate the 3 Cs and 4 Ps:

๐˜พ๐™ช๐™จ๐™ฉ๐™ค๐™ข๐™š๐™ง: Your audience or target.ย  If you donโ€™t enjoy working with seniors, no matter how attractive the large market appears, an in-home senior care business isnโ€™t really for you.

๐˜พ๐™ค๐™ข๐™ฅ๐™š๐™ฉ๐™ž๐™ฉ๐™ž๐™ค๐™ฃ: Who are the direct and indirect competitors?ย  Do they or will they threaten the business?

๐˜พ๐™ค๐™ข๐™ฅ๐™–๐™ฃ๐™ฎ: Determine the franchisor goals, strengths and weaknesses.ย  Does the franchise continually strive for improvement and optimization?ย  Look for internal (franchisee validation) and external (Franchisee Satisfaction awards) analysis.

๐™‹๐™ง๐™ค๐™™๐™ช๐™˜๐™ฉ: Design-Appearance? Quality? Packaging?

๐™‹๐™ง๐™ž๐™˜๐™š: Knowing supply, demand, competitive product, other fees, pricing terms. What price will the market bear?

๐™‹๐™ง๐™ค๐™ข๐™ค๐™ฉ๐™ž๐™ค๐™ฃ: Advertising, public relations and promotional strategy?

๐™‹๐™ก๐™–๐™˜๐™š: How and where is it distributed? Is that convenient for the customer?

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๐—–๐—ผ๐—บ๐—ฝ๐—ฒ๐˜๐—ถ๐˜๐—ถ๐˜ƒ๐—ฒ ๐—˜๐—ป๐˜ƒ๐—ถ๐—ฟ๐—ผ๐—ป๐—บ๐—ฒ๐—ป๐˜

In 1979, a Harvardย economist specializing in industrial organization, Michael Porter, wrote a Harvard Business Review article entitled “How Competitive Forces Shape Strategy.” Today it is still considered one of the best sources on the subject of economic market competition.

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๐™๐™๐™ง๐™š๐™–๐™ฉ ๐™ค๐™› ๐™€๐™ฃ๐™ฉ๐™ง๐™ฎ

Companies decide to enter a market for any number of reasons-the area is under-served,ย profit margins are unusually high or the product has a distinct advantage and/orย a patent. Porter asserts that it is essential for business survival to focus on futureย sources of competition rather than on current products.

ย  ย  ย  ย ย ๐™Ž๐™ช๐™ฅ๐™ฅ๐™ก๐™ž๐™š๐™ง ๐™‹๐™ค๐™ฌ๐™š๐™ง ๐™’๐™๐™š๐™ฃ ๐™ˆ๐™–๐™ฃ๐™ฎ ๐˜ฝ๐™ช๐™ฎ๐™š๐™ง๐™จ

Are there only a few brands supplying the product/service in the market and buying demand is high? Pricing and revenues will be high for those companies.

ย  ย  ย  ย ย ๐˜ฝ๐™ช๐™ฎ๐™š๐™ง ๐™‹๐™ค๐™ฌ๐™š๐™ง ๐™’๐™๐™š๐™ฃ ๐™ˆ๐™–๐™ฃ๐™ฎ ๐™Ž๐™ช๐™ฅ๐™ฅ๐™ก๐™ž๐™š๐™ง๐™จ

Are there many suppliers of a particular product/service? Pricing will be very low.

ย  ย  ย  ย ย ๐™๐™๐™ง๐™š๐™–๐™ฉ ๐™ค๐™› ๐™Ž๐™ช๐™—๐™จ๐™ฉ๐™ž๐™ฉ๐™ช๐™ฉ๐™š๐™จ

Too many similar products or services provide a threat to survival (unless the market is large and its expected duration is many years i.e. in-home care).ย  But threats can comeย from a new, dissimilar product replacing an existing product (i.e. email vs. post officeย mail).

ย  ย  ย  ย ย ๐™๐™๐™ง๐™š๐™–๐™ฉ ๐™ค๐™› ๐˜พ๐™ค๐™ข๐™ฅ๐™š๐™ฉ๐™ž๐™ฉ๐™ž๐™ซ๐™š ๐™๐™ž๐™ซ๐™–๐™ก๐™ง๐™ฎ

Porter’s fifth force is the cumulative effect of the first four. Competition can come from anywhere, from innovative new products, from the advent of strong new providers or buyers controlling the marketplace, or from product replacements made possible by deregulation, innovation, or more cost-effective manufacturing procedures, relying on innovative technology, lower-cost labor or both.

This may seem ominous since no one has a crystal ball but the Franchisor should knowย their competitive environment especially if they have been around many years.ย  It is stillย prudent to do some investigation on your own but the brand should be able to give youย good picture of their competitive outlook.

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ย ๐—ฅ๐—ฒ๐˜ƒ๐—ฒ๐—ป๐˜‚๐—ฒ ๐— ๐—ผ๐—ฑ๐—ฒ๐—น

A key component of a conceptโ€™s business model is how it generates revenues. It states which revenue source to pursue, what value to offer, how to price the value, and who pays for the value. Examples: retail, subscription, advertising, licensing, transactional, etc.

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๐—ฆ๐˜‚๐—ฝ๐—ฝ๐—ผ๐—ฟ๐˜

How are franchisees supported?

ยทย ย Type of training, duration, etc.
ยทย ย Home office support: site selection, marketing (brochures,ย  ย  ย  promotions, social media, advertising, etc.), operationsย  ย  ย  ย  ย  ย  manual, technology, meetings/conferences
ยทย  ย Field support: area manager, field visits
ยทย  ย Support from other franchisees

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๐—ข๐—ฟ๐—ด๐—ฎ๐—ป๐—ถ๐˜‡๐—ฎ๐˜๐—ถ๐—ผ๐—ป๐—ฎ๐—น ๐—˜๐˜…๐—ฝ๐—ฎ๐—ป๐˜€๐—ถ๐—ผ๐—ป

In its own way franchising is an expansion of the organization through either single or multi-units.ย  Area development is an added dimension.

Within a franchise concept, a franchisee will grow the business by adding staff, services, etc. when they reach certain milestones.ย  Ensure that the franchisor has a plan in their model as you expand.

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๐—ฆ๐˜‚๐—บ๐—บ๐—ฎ๐˜๐—ถ๐—ผ๐—ป

Most of the information can be discovered via

ยทย  ย  ย  ย the franchisor through the Franchise Disclosureย  ย  ย  ย  ย  ย  ย  ย  ย  ย  ย  ย Document (FDD), conversations with them, through theirย  ย  ย  ย  ย collateral
ยทย  ย  researching the industry and market yourself
ยทย  ย  speaking to other franchisees during validationย ย 

You like the products and audience but does the business model resonate with you?

No-charge Franchise Consultation: 855-725-1970 (U.S.); 760-473-4659 (SMS; WhatsApp). malbanna@global-business-connect.com. View call availability on the calendar or schedule a call at https://app.acuityscheduling.com/schedule.php?owner=16315311

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