Why should you become a franchisor?

Pilot Phase

At the beginning of all franchise systems there is always an innovative idea. As well as offering their franchisees an innovation, franchisors also offer them a further factor. They sell them certainty. that their kind of business has been successful in at least the pilot business. The factors for success in the pilot phase for the future franchisee businesses can be divided into five groups:

Product and/or Service
A product innovation also involves risks. Not all customers react enthusiastically to new ideas. A simple example of this was McDonald’s failure to break onto the German market at the beginning of the 70s. Customer requirements are different from region to region. Before expanding his business throughout the whole of the country, the franchisor must, therefore, first find out the level of acceptance for his product or service. If this level of acceptance is insufficient then the market must first be prepared by using marketing measures and the potential customers convinced of the usefulness of the new kind of business. Some so-called innovations are merely fashion trends which disappear within a short period of time. Before building up his system, therefore, the franchisor should examine whether the life cycle of his product is really longer than the length of the contract.

Good franchisors know not only how a typical site should be but also why it should have these characteristics as a result of analysing their pilot business. For a retail shop, for example, they have clear standards for:

Entrepreneurial / Sales Personality
Experienced franchisors know that the personality of the franchisee and his surroundings play a decisive role in his success. No-one, however, can be strong in all matters. It is, therefore, important to establish exactly which personal characteristics are decisive for the management of the franchising business. Future franchisors should, for example, be able to answer the following questions concerning the franchisee profile from their experience during the pilot phase:

Sales Procedure
The customer is the centre of attention. Franchisors know to whom they are selling their products. They know the motives which lead them to purchase the product or which prevent them from doing so and adapt their sales procedure to the customers. If the customer groups are very different then they have special sales procedures for each group. It is precisely in this area that the managerial abilities of a franchisor are demonstrated.

Management of the Business
Future franchisors often ask the question: "How can I protect myself from someone coming into my shop or someone employed by me copying my business?" If it is so easy to copy the business then the system is not suitable for being built up into a franchise network. Franchisors must ensure that their partner businesses have a long-term competitive advantage. Besides, no-one can demand a 5-figure entry fee, if an outsider can so easily discover the secrets of this business type.

Source: Jens Syring, Management Consultant

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