Advisory Dec, 19 2011

From an entrepreneur to successful franchisor

To successfully establish a brand is not a climax in fact it is the beginning of a new voyage to be a winning franchisor. Becoming a top-notch franchisor is not so easy for everyone. Tweak more to know about the formula of a successful franchisor.

By Neha Gohil
Feature Writer
From an entrepreneur to  successful franchisor

When a brand is successfully established an entrepreneur starts looking around to expand significantly to maximise the size and profit. For expansion the first thing that strikes to an entrepreneurs’ mind is to consider various modes of expansion. Franchising has emerged over the years as the most effective mode of expansion. Many fortunes have been built on franchising.

Shahnaz Husain, Founder and Owner, The Shahnaz Husain Group shares, “Today globalisation has become an important part of the economy. Therefore, the importance of business expansion has also increased.” Franchising a business concept grows it to a level where it fits in the market. If the business has the potential for significant growth the market value will raise. Husain added, “Before starting a franchise business, it is essential for the franchisor to establish the brand. Brand recognition and brand loyalty are important in the franchising business. If the brand is well established and well positioned in the market, there is a demand for franchises.”

Business Tycoons built on franchising

There are number of examples of individuals who have built their empires on franchising. Dan & Frank Carney, David C Novak who founded Pizza Hut in 1958 today operates over12500 restaurants across 94 countries approx. Fred DeLuca the owner of the fastest growing franchise chain Subway today operates in 98 countries, and owe its success to franchising.  Shahnaz Husain founded The Shahnaz Husain Group in the year 1971 and today it has presence in more than 100 countries via franchising. Vikas Gutgutia started Ferns ‘N’ Petals, the popular florist chain in 1994 and today it operates more than 55 retail outlets. All these are the few examples to show how franchising has contributed in creating most successful business giants.

Becoming an ideal franchisor

To do it yourself is much easier, then to create successful businessmen. This is what franchising is expert at. Here are few steps to be a successful franchisor.

Always have secured finances: Every business needs capital for growth. In franchising also you need money to expand your reach. Sometimes people have this misconception that in franchising capital investment is done by franchisee. However, a franchisor cannot depend upon franchisee for investment always.

Selecting franchisees: Franchisees can be appointed based on their capacities to manage franchisees.

  • Single-unit franchising: An entrepreneur who has limited capital to invest should be appointed for single-unit franchising, as he would not be able to manage multi-units. The franchisee typically has a particular territory that is covered by the unit. With a single unit franchise, the investment costs are less. Although most single unit franchises are profitable.
  • Multi-unit franchising: Multi-unit franchising creates the opportunity for a franchisee to open more than one unit. This type of franchising is not typically limited to a particular area. The initial total investment is higher than opening a single unit franchise. Owning more units can increase the overall probability of success. Similarly an entrepreneur who can invest and can manage multiple unit should be appointed as a multi unit franchisee.
  • Sub-franchising: Often known as master franchising, sub-franchising involves two levels of franchises: sub-franchisors and sub-franchisees. Sub-franchisors are like a franchisor in that they will often be liable for recruiting and providing ongoing support to operating franchisees. However, in contrast to the franchisor with nationwide interests, they are responsible for a smaller area. Quiznos is an apt example of sub-franchising.

Manpower: Franchising requires a lot of manpower. A franchisor needs more people under him to manage things. For expansion and to manage the chain of franchisees more and more people are required.

Market segment: A franchisor should do a survey to find out the target audience before selling franchisee. Knowing who your customers are will help you target your marketing activities into reaching the optimum number of sales.

Marketing strategy: One of the most important things for franchisor is to create and maintain a successful marketing strategy. Identifying who your potential franchisees are is also vital. It will also help you establish reasonable franchisee fees and royalties. Franchisor should research other franchise businesses offering similar products and services and see who their franchisees are. Marketing plan should include a great advertising strategy as well.

Monitoring the franchise network: A franchisor must monitor its franchisees and control them. He or she should also monitor each an every outlet time to time. Shahnaz shares, “Consumers today expect a high level of service and professionalism. Keeping this is in mind we ensure that franchisees have standardized interiors, equipment and a commitment to a positive customer experience. As the franchisor, we provide the necessary assistance in site selection, project management, layout and interiors, marketing and all standard operating procedures, equipment sourcing, trouble shooting tips, product planning, etc.”

Momentum: Upgrading the system according to time and technology is very important for growth by every entrepreneur. Continuous research and development should be done to improve the process. Shahnaz shares: “The franchisor must be prepared to provide support to the franchisee. For example, we provide a pillar of support to franchisees in terms of R&D and launch of innovative products and specialised treatments from time to time.”

To become an ideal franchisor it takes a lot of effort and time. If an entrepreneur takes one step after the other with great consciousness there is all possibility of a successful franchise empire can be created with a winning franchisor.

Related: Slow and steady wins the race

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