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The freedoms of franchising

Business Woman Celebrating Success Towards City SkylineBy Darrell Jarvis
As a prospective businessperson, you are interested in establishing and operating your own business and being your own boss. By picking up this magazine, you are considering pursuing your interest with a franchise, rather than starting a new business from scratch. You may have found additional confidence from the promise of an established track record, existing systems and designs, and the offer of training, support and advice. However, by buying into a franchise, are you sacrificing the freedom you are looking for?

If franchisors were to create a recipe for the perfect franchisee, the ingredients would include attributes like business acumen, customer service orientation, leadership skills, and, depending on the franchise system, perhaps even a caring attitude or artistic abilities. Fundamentally, however, the recipe would also include one part entrepreneurship to two parts compliance.

A fine balance
To a franchisor, model franchisees, especially those operating in remote markets, are ‘making things happen’ in their business, using the resources available to them rather than relying on the franchisor to do it for them. They are involved in their communities, whether as members of local clubs or social groups, and building their businesses through local events or co-promotions with businesses in town. They are vigilant about their managing their costs and may have great ideas on how to optimize inventory, manage labour costs more efficiently and reduce waste. However, while franchisors encourage an energetic, hands-on approach to running a franchise, they also insist that franchisees stay within the parameters of the franchisor’s system.

Overly entrepreneurial franchisees who change the business, introduce new products (or drop existing ones), switch suppliers or increase prices without the franchisor’s consent will not fit well into a franchise system. Even franchisees who continuously advocate for such changes may quickly wear out their welcome. As you consider your path to owning a business, be mindful of franchising’s unique balance between entrepreneurialism and compliance with established standards and guidelines.

A reason for standards
These constraints are typically in place for the benefit of all franchisees. A franchisor has created a business concept and developed it into a system which may include the design and décor of outlets; product specifications; recipes; trademarks and logos; uniforms; signage; suppliers; and all the other elements of a successful franchise. Franchisors want to expand their brands through the consistent replication of outlets that remain true to the system.

A franchisor’s insistence on compliance with system standards goes to the heart of franchising and delivering a consistent brand experience. Consumers are generally expecting to receive the same experience every time they interact with a franchised brand.

For example, if a value-conscious consumer buys a particular item at a retail franchise because of its low cost, she will expect to receive the same low cost every time at every location. Similarly, if a consumer is willing to pay more for a premium experience, she will expect to enjoy the same premium experience regardless of which location she chooses. This is true whether she is purchasing packaged goods, getting an oil change or ordering a steak.

When one franchisee fails to deliver the brand experience, he affects not only his own business, but also the business of other surrounding franchisees. This applies not only to those who fall below certain standards, but also those franchisees who create higher standards. For example, if one franchisee offers a superior experience that is inconsistent with the rest of the system, he is likely setting up the customer for disappointment should the customer visit a different location.

A two-way street
An enlightened franchisor may welcome ideas from the field about how to improve the business. However, it will be sceptical of a franchisee who arrives in the system knowing little about the business but soon determines that he or she knows more than the franchisor. It will generally have no tolerance for a franchisee who makes changes without consulting the franchisor. As a prospective franchisee, you would be well advised to assume you will not have an opportunity to alter the business system once you sign on as a franchisee.

This is not to suggest that franchisors don’t have to be responsive to the needs of local markets, especially when franchising internationally. An ideal franchisor will give you the flexibility to respond to local preferences, in order to remain competitive in the marketplace (while still insisting that you deliver on the brand’s core values).

For example, I recall visiting a relative in northwest Ontario and going out to a franchised roadhouse-style restaurant for what was recognized locally as the ‘best steak in town.’ Before that meal, I wasn’t even aware the brand served steaks, let alone high-quality ones. I suspect the franchisee had departed from the system standards—hopefully with the knowledge and consent of the franchisor—to take advantage of an opportunity in a relatively isolated market.

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