3 Unique Elements to Look For in a Franchise
When looking to start a business there are a number of options available to you:
- You can “go it alone” and start a full-time business that you own 100%
- You can start a business in partnership with someone else, or a group of others
- You can buy into a Franchise system
Within each option above there are sub-options, for example starting a traditional “offline” business or starting a business online.
I’m fortunate to have had, or currently be operating, all three types of businesses. When it comes to franchising specifically, I’ve owned a single site, been a multi-unit franchisee and also part-owner of a franchise group as a whole which has given me some unique insights into the pros and cons of franchising.
In my view, getting involved with a franchise is not only viable, but often the best path to take.
Why?
The list of benefits to getting involved with a franchise is lengthy, but fundamentally, for new business owners without any prior business experience, the efficiency of being able to plug into an established operating model with systems in place is huge. No need to make mistakes yourself because they’ve probably already been made by prior franchisees and a system had likely been implemented to prevent it happening again.
But not all franchises are made equal and there are a handful of franchise system elements to look out for before you dive in. Let’s take a look:
1. Unique Business Model
In any established industry with multiple franchise group already competing for market share, the underlying strength of the business model is key. You want to make sure that the franchise group you’re about to partner with has something unique in it’s core business model that sets it apart from competition, and that is going to be difficult for competitors to replicate.
I’ll use the former Franchise system that I was a part of to illustrate the point. The company is EFM Health Clubs, an established company in the Australian fitness industry. The Australian fitness industry is competitive and cluttered with gym chains. However, those competitors all have a very similar business model:
- Find a premises on a main road with plenty of passing vehicular traffic OR Find a premises within a shopping complex with plenty of foot traffic and pay big lease costs
- Spend a big chunk of money on mass marketing to local residents and workers
- Hire an army of sales staff to sell memberships and retain members when they try to cancel their membership
That model works, but the issue with it is that all the gym chains are doing the exact same thing. So in the end, they are competing on price and convenience of location alone.
EFM are the exception to the rule, let’s see how;
- They position their gyms on site at schools or hospitals and pay zero or very little lease costs (very clever corporate agreements in place with those schools and hospitals)
- They place higher emphasis on member satisfaction and therefore retain a high percentage of members and don’t have to sell as many memberships
- They keep staff levels to a minimum, often just the Franchisee and one or two other trainers and so business overheads are low
EFM franchises operate on lower overheads, with substantial profit margins once established and arguably have a more fulfilling business because a significant number of new members actually stay long-term and achieve the results they set out to achieve. The EFM model is efficient and frankly, it astounds me that other gyms in the market have not yet caught onto the fundamentals. Old habits die hard I guess.
When you look through each industry, you’ll find similar examples where there are certain franchise groups that have broken from the pack and have something innovative to off you as a business owner.
2. Unique Service Offering
The last thing you want to be doing is joining a franchise with a “vanilla” product or service.
When you go to the ice-cream store, you’re looking for something with color and flavor. You’re highly likely to pay a little bit more for something above a standard flavor like vanilla.
Most people are exactly the same with all their purchases and the main issue you have if your product or service offering is “vanilla” is that customers will start shopping on price.
And getting into a race to the bottom on price is not a place you want to go. In my view, I’d rather be the highest price, highest-value service or product provider than the lowest price, lowest-value offering because there’s always going to be someone that is able and willing to do it cheaper than you.
So when assessing the service or product offering of the franchise group you’re evaluating, just ensure that it holds a unique place in the industry.
3. Unique Online Presence
I don’t need to tell you that business is moving online at a rapid pace > that’s so 2005!
Despite how much people are connected online per day, many businesses, indeed many big franchise groups, have still not yet established a solid online presence to reflect the massive opportunity the internet and social media presents.
Perhaps it’s because there are so many elements to it; there is ALOT that brands can focus on so it’s no easy task to be across it all. At a minimum, look to ensure that your franchise has the following online components in place:
- Social media: Not only a presence, but a clear social media strategy and direction. Merely having a company Facebook page and Twitter account is not enough any more
- Website: A fully-functional website that is optimized for mobile and designed to convert (there should be clear call to actions on the site)
- Integration: Many franchise groups have integrated systems in place where the sales process is semi-automated, perhaps products can be purchased online with minimal input from the Franchisee, client record keeping is pulled into a central system. All these things help with your business efficiency and are vital.
- Adequate staffing: Either direct employees or consultants that are engaged to provide regular and ongoing online marketing advice. Things are moving so fat online that a few months without someone keeping up with the latest can put your franchise group steps behind the competition.
