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In the last post, we discussed the advantages of small franchise networks.
In this post we’ll look at the advantages of large franchise networks.
Large networks, those with more than 250 franchisees, have three distinct advantages over all the other franchise networks: Money. Money. Money.
While many people (especially would-be franchisors) believe that franchising is a model for building a franchisor’s personal ATM, franchising is expensive. And since the majority of franchise networks in North America include fewer than 250 franchisees, many small franchisors are constantly scraping for money to build their networks and meet their financial obligations. Consequently, and unfortunately, these smaller networks sometiems struggle to afford the personnel or develop the resources to assist their franchisees. And when franchisors fail their franchisees, trouble isn’t far behind. As George Bernard Shaw told us, “Lack of money is the root of evil.”
However, it’s an entirely different story once a franchisor turns the corner and makes it to large-franchise-network-status. For most of those networks, money isn’t a problem, and, depending on the franchisor’s integrity, that’s a huge advantage for franchisees.
At the A to Zs of Buying a Franchise, the International Franchise Expo’s most popular symposium for more than 20 years, we often hear the seminar leader, Dr. John P. Hayes, state that not all franchisors are created equal. “Some are better than others,” he explains. “Some understand that their primary role is to generate profits while creating satisfied franchisees, or customers. Their primary job is not to enrich the franchisor by hoarding all the money!”
Money, enough of it at least, makes it possible for the large network franchisors to cater to their franchisees, which effectively accelerates the new franchisee’s performance and leads the franchisee to profits and satisfaction. In these cases, everyone wins. The franchisee builds a successful business, which generates bigger royalties that are paid to the franchisor; the franchisor collects more money, which can be re-invested in the franchisees; the franchise network enjoys a reputation for success, which sells more franchises! That’s precisely how franchising should work, and it does most of the time, especially among the large franchise networks.
With money, there’s no end to what a franchisor can do for its franchise network, and “do” is the operative word. Benjamin Franklin told us, “The use of money is all the advantage there is in having it.” Here are three ways large franchise networks use money to help franchisees:
1. They hire corporate staff . Good franchisors recognize their limitations and they can hire experts in training, marketing, brand development, franchisee support, research and development, HR, legal, accounting, etc. In the small franchise network, it’s not unusual for the founder to fulfill several of those key roles.
2. They offer training programs regionally as well as nationally so that more franchisees can participate in them, and when necessary, they spend time in the field working one-on-one with franchisees in need. They help franchisees better understand how to operate the business and they re-train franchisees when necessary. Bill Gates told us, “We’ve got to put a lot of money into changing behavior,” and that’s especially true in franchising, which depends on people from diverse backgrounds. Franchisors with limited resources hope their training sticks the first time the franchisees hear it because they may not get a second chance. And yet, more frequent training results in more franchisees succeeding, but training is expensive.
3. They contribute (or possibly loan) money to the franchise advertising fund to better promote the brand and drive more customers or sales opportunities to the franchisees. A franchise network that’s strapped for money must rely on the franchisees to promote the brand, but how effective is that if the franchisees are also strapped for money? Large franchise networks bring resources to their franchisees’ advertising and promotion campaigns.
Small franchise networks pray for the day when they break the size barrier because, as Ayn Rand told us, “All sins are forgiven once you start making a lot of money.” Of course, large franchise networks don’t just concentrate on making a lot of money; they focus on meeting the needs of their franchisees. Marilyn Monroe told us, “I don’t want to make money, I jut want to be wonderful.” So does every franchisor.
