franchisor

In relation to my previous blog post about my guest post that seems being unpublished, I decided to publish the post here.

I think I guest the post myself, for you to enjoy :)

Why Brand Management is Paramount in Franchising

Brand management is important for any businesses. However, it is paramount for franchise businesses.

You know what really troubles me in running my franchise units?

No, it’s not really my franchisor who troubles me. Surprise, surprise - it’s my fellow franchisees.

This is fact - not all franchisees are cooperative. The owners buy the franchise units hoping for a shortcut into entrepreneurship. Although for some cases it’s true, it’s not really true for most.

Franchising requires franchisees to follow set rules enacted by the franchisor. The basic rule of thumb, if you followed all the rules and the operation manual point by point, you will likely to succeed.

The problem with those who hope for a shortcut into entrepreneurship, they usually think that they can do whatever they can to their franchise units. The truth: not! - Rule number one: follow the rule or get ’sacked’ by the franchisor. Rule number two: read rule number one. Not all franchisees are happy with those rules.

What do unhappy franchisees do?

1. They want out - they will either sell the unit or bail out of the agreement.
2. They half-abandon their franchise unit.
3. They speak bad words about the franchisor - even considering the fact that the blame is actually on them.

The unhappy franchisee type #1 is not damaging the brand of the franchisor, but the #2 and #3 is.

Why brand management is paramount in franchising? Because a franchise is not only built by the franchisor, but also by the franchisees.

If a franchise unit’s performace is spectacular, the other franchise units reap the positive reputation and enhanced brand image. If a franchise unit is a failure, the brand image is affected. Plain and simple.

I once complained to my franchisors on how other franchisees manage their franchise units - not because I feel I run my units the best, but for the fact that I want the benefit of the brand name I rented! Rented? Well, of course - I pay for the franchise, royalty and marketing fee - all in all, I pay rent for the brand name I use for my units. If somebody messed with the brand, not only he/she is messing around with the franchisor, but also with me :)

To cut the story short, I am a happy camper due the fact that my franchisor is listening to the franchisees’ complaint - some franchisees are, finally, ’sacked’ and force to either close down their business or transfer ownership of their units - to preserve the brand image.

Are you involved in franchising or other businesses and have a story to share? Please do share yours by commenting to this article.

Ivan Widjaya
Brand builder

I’ve post a few on franchising - mostly from the eye of a franchisee.

This time, I present you a story from the franchisor side.

A story from the CEO of nation’s leading Business Services Center about franchising

When I’m talking about nation’s leading franchise, it’s non-US; It’s in a country where I live right now - just to clarify :)

I have a good relationship with my franchisor - the CEO of the Business Services Center. We share a lot about franchising.

One time, he shared a story that broaden my insight on franchising.

Not all franchisors share the vision of ‘growing together’

He mentioned that many franchisors think about franchising as a vehicle to rapidly grow their business and assets - that pushes franchisee interests on lower priorities.

He stated that it is his interest for franchisee and franchisor to grow together, because if the franchisees succeed the franchisor will reap the result, too - better brand value and awareness, and strong franchise performance, that lead to many opportunities.

Franchising your business is not easy

Franchising seems like a good idea to expand a business - but it’s not easy. He shared that although the cashflow is admittedly nice (in my case, the royalty fee is 5% of sales), almost all are ‘vanished’ into R & D and marketing campaigns.

He stated that the overhead in franchising is nose-bleedingly high - cost are sky high, and performances could be better. What gives? Mismanagement in the headquarters?

He honestly said that the liabilities here is not only the franchisor, but also the franchisee - ‘bad’ and uncooperative franchisees slow progress and consume unnecessary resources.

The impact is severe - the other cooperative franchisees and the franchisor suffer the consequences - lackluster support, damaged brand image and value, and lose focus.

How to solve? To ‘weed out’ bad franchisees, he had to splash some money to buy back the broken franchise units. His franchising strategy doesn’t include closing franchise units - buying them back are more viable, in his opinion, to preserve the brand image.

It’s simply not easy.

If it is not easy, why you insist on the benefit of franchising?

Despite the problems above, he mentioned that franchising is necessary, and a great, time tested, business strategy.

He took the franchising route, rather than licensing or partnership route, to incorporate exponential nature of franchising.

Exponential means covering strategic areas fast and outnumbered competitors - hence, achieving better brand awareness and exposure.

Franchising is at it best if the franchisor and franchisee can work well together

The power of franchising lies in the ability to agreed on a common goal despite all the differences. McDonald’s - a classic story of a successful franchise - becomes one of the world’s leading francishors due to its ability to work together with the franchisees.

Currently, my franchisor have more than 110 franchise units nationwide.

My benefit as a franchisee? A brand image that is nationwide, and a profitable business, thanks to the effort of my franchisor.

The end.

Ivan Widjaja
Franchise believer

If you read my previous post about franchise, you might already know that I have several franchise units.

Having a plunge into franchising without much knowledge about it teach me a lot about choosing the right franchise for me.

I have a few tips for those of you interested in owning a franchise unit:

1. Don’t buy a franchise unit because it involves your hobby - Your hobby is fun, and running a franchise is hard work, although it can also be a bit fun. You will soon realise that making money out of your hobby is not that fun anymore - you’ll end up stressed-up and demotivated.
2. Don’t buy a franchise because it’s cutting-edge - cutting-edge business is yet to prove itself in the marketplace. Although it might be hyped by the community, but we never know the business life-cycle. Is it rise fast and die fast? I suggest to find a franchise that not-so-cutting-edge, but stands firm at the test of time.
3. Choose a franchise which own an own-unit or two - Don’t touch franchise that has no own unit! Choosing a franchise having one or more own units lets you see the business in action and the potential it has before you decide to own one.
4. Choose a franchise which royalty fee depends on how much your unit make - Don’t choose franchise with a fixed percentage of royalty fee - It will bring your franchisee unit having a hard time early in its life.
5. Don’t choose a franchise that boast fast ROI - NONE of them has fast ROI on most of their units. It’s usually true only for a small number of high-performing units. Run away from franchises that offer you a guaranteed BEP and/or ROI period.
6. Franchises are also businesses - They can FAIL. A proven franchise can minimise the risk, not eliminating
7. Don’t buy franchise unit to be rich and free - Being rich is a possibility. Sipping a cocktail on the side of a pool is wonderful. Alas, it’s not the typical lifestyle for franchise unit owners. Franchising demands a lot of you - rules to follow, limitations to negotiate. Anyway, it’s THEIR brand name you RENT in return for a franchise fee. Franchisors have any right to push you to grow your franchise units.
8. Franchising may not the right venue for entrepreneurs - with limitations and regulations, budding entrepreneurs will get bored, and eventually fed up of all the creativity-limiting franchise system.

I’m not saying franchising is bad. I like it - I own several units!

But, entering franchising should be in the right attitude and understanding. Franchising is not easy, but it can give you hefty cash flow, if you can manage your units well.

Two last statements to be pondered - If you feel safe within rules and regulations, franchising is definitely for you - buy a franchise unit. But, if you love to against mainstreams and like to do things your own way, stay away from franchising - start your own business.

Ivan Widjaya
In a love-hate relationship with franchising

I owned several local franchise units. To tell you the truth, the first time I buy a franchise unit is my effort to cut my way into entrepreneurship. I thought it was easy. It’s not.

I learn franchising the hard way. Many people, just like me, buy a franchise unit with a wrong reason - mainly, they want to take a short cut into the world of entrepreneurship and to live an American Dream - fast cars, house with pools, lots of zeros in bank accounts, etc. This way, they - including me at that time - will be guaranteed failure even before the business itself run.

Franchising takes a lot of work - and money. You see, the premise behind franchising is that you ‘lease’ a proven system - developed through trial-and-error and involved a lot of resources - in exchange for a sum of money (typically a franchise fee and a royalty fee). Expensive? Yes. In return, you’ll receive support and expertise that will help you to run your business. Therefore, are franchise units are less likely to fail? Yes. But they DO fail, although on a significantly lower rates - mostly, it’s not the franchise system that fails. The franchisee is the main culprit.

I love franchising. I love the idea of running a business will less risk of failure. But somehow, I failed in one of the franchise units I owned. Why? Again, wrong reasons to buy the franchise unit.

Wrong reasons to buy a franchise unit

• Get rich quick - If a franchise offer you this, run away! Getting rich in franchising is a marathon, not a sprint
• Franchise units are easy to run - The system is there, but it’s not easy to run. Not only customers expect you to perform, but also your employees and your franchisor
• The system will run the business by itself - Not possible! You need manpower, and manpower need to be managed
• Customers will come by themselves because of the brand name - Yes, they will probably do so, but retaining a returning customers are paramount, and this is what most franchisee forget to do!
• To become an entrepreneur - Entrepreneurship can’t be bought! It’s action and hard work that make someone becoming an entrepreneur. Even in most franchising case, entrepreneurship is suppressed! Franchisors need people who can follow rules and guidelines, not people who try new things all the time.

If it’s not easy, why franchising is so appealing?

Franchising IS appealing. If you can follow rules and guidelines in a system, you are most likely to succeed. Creativity is usually encouraged, but it must be under franchisor’s approval. Following franchisor’s footsteps is highly encouraged - it’s the only blueprint to success.

Some words of advice on becoming a successful franchisee

Of course, it’s your job to choose the right franchise - bad franchise will always mean bad result for you, no matter how hard you try to improve your franchise unit.

So, do your homework - list franchises that you are having interest in, and contact them one by one. Don’t do this by phone! Meet face to face and have a conversation, because franchising is like having a family - You stick to your franchisor for a lifetime of your franchising agreement. No matter how promising a franchise is, if you are not comfortable with your franchisor, just move on.

Schmooze your franchisor! Spread good words of your franchisor to your colleagues. Give valuable advice. Help your franchisor solve business problems. You will reap what you sow in one way or another - good words on you, referrals, unexpected opportunities, etc.

Don’t team up with other franchisees to form a union against your franchisor! Network with other franchisees to develop and market the franchise, and most likely, your franchisor will help you with resources, including funds. Your franchisor’s fund for your franchise units benefit - sweet deal! :)

Patience is key. Franchise businesses do return your investment in longer period than other type of businesses. But the system will provide you longer business life cycle and longer period to reap for profit. If you don’t see results immediately, relax. In my experience, that is the typical franchise business - longer return on investment, even longer break even point.

The most important tip: Follow your franchise rules and guidelines. I can’t stop reminding you of this because it is very important. Most of the time, your ability to follow rules and guidelines will eventually determine your success. Trust me, I’ve been there.

If you have all the resources and mindsets needed, I highly recommend you to buy a franchise unit. Lower risk, longer business life cycle, longer period for profit - It’s heaven, IF you are the right person for franchising.

Related posts other people has read:

Buying a Franchise - A Good Way to Network and Get Some more Business

How to Choose the Right Franchise

Noobpreneur.com is On Top 50 Franchising Blog Post 2008

Purchase a Franchise or Starting Up Your Own Business?

How to Choose the Right Franchise - Episode 2