Advisory Dec, 21 2012

Protect your brand against dilution

Every franchisor needs to protect the real essence of the brand. It can be possible only when he designs a right business model and also standardises the franchise agreement. Read on to know more...

By Rita G Chauhan
Sub-Editor
Protect your brand against dilution

Brand is a constructive structure of any business thought which is made up of various elements like logo, graphics, tagline, shapes, colours etc. Basically, it is identified by a symbol which differentiates a company for its goods and services from others. It also plays a vital role to create a quick and emotional impact on consumers mind to attract attention. A franchisor puts in years of hard work and efforts to create and successfully establish his or her brand and make it acceptable among wider consumer base. When he selects franchise model for expanding business    he expects to grow and strengthen his brand in new markets as well.  However, as local partnerships bring immense benefits for a company’s growth, they also bring the risk of brand dilution.  As Alok Mathur, Director  & CEO, GOBOL, a venture of Attero Recycling Pvt. Ltd says, “A company that owns a strong brand obviously wants to leverage it to sell as much as possible, but the very strategies used to pursue this end often also brings the danger of brand dilution”.  It is every brand owner’s or franchisor’s concern as well as responsibility to guard his brand against the risk of dilution. They can resort to various methods to do so. Some of the strategies are discussed below.

What is brand dilution? 

No business model is a perfect one. In franchising, brand dilution is an ever present risk for a brand owner. “Brand dilution is the weakening of a brand though its overuse. This frequently happens as a result of ill-judged brand expansion, which results in undue competition and price cutting, diluting the brand image”, informs Alok Mathur of GOBOL. The companies need to maintain a uniform brand image throughout their store or branch network whether it is company-owned or franchised or company owned to preserve brand equity. They can do so by standardising operations, maintaining same store layout including interiors, furniture and fixtures,   similar product or service delivery, uniformity in matters related to HR, accounting and reporting system etc. Thus, protecting the originality of brand is a primary task for a franchisor.

The process of brand dilution 

Brand dilution is an unfortunate reality of franchised operations. In franchising, when a company expands its network and grows, it also weakens its control over the entire system. Sometimes, it may have to compromise on product or service standards and quality. This may result in loss of consumer base and eventually market share.

Many times a franchisee or local partner may try to do his best for the growing the business but he may fail in many ways that diminishes the brand image locally. The brand loses its brand associations with customers, market, product area, its quality, price etc. It is only a franchisor who can do as much as for the success and reputation of his brand.

Franchise agreement, a tool against brand dilution

How to get over the risk of brand dilution is a question that every franchisor faces. The franchise agreement can serve as an effective tool to counter this risk. Rahul Leekha, GM, Di Bella Coffee India shares, “Before recruiting franchisees, it is important that good quality legal agreement should be prepared by a franchisor under the guidance of a knowledgeable person of both the legal and commercial subtleties of franchising. As fair obligations included in agreement, a franchisee should operate the franchise strictly in accordance with the franchise system. He should also advertise and promote the franchise in accordance with the directions, requirements and specifications as instructed by the franchisor. To ensure the quality control, a franchisor should plan regular inspections tours at franchised stores time to time”. He also emphasises on the use of a common brand name, logo, identity, and quality.

Maintaining uniformity in franchise system 

Franchise has to consider ways to protect the franchise system against brand dilution. Maintaing uniformity throughout franchisee network helps in protecting the brand.  Gobol’s Alok Mathur informs, “Our franchisees should use the same logo, trademarks, colour schemes and designs as decided by Gobol. The pricing of products should also remain the same as decided by the company across all franchise stores. The franchisee stores should maintain the same look ‘ n’ feel and conform with Gobol’s image and the general rules set up by the brand to deliver a similar customer experience across all outlets.

To conclude, as Alok Mathur sums up, “The best place to start protecting your brand is when you first develop your business. Franchised brand is harder to protect because it is up to the franchisee to keep the integrity of the national brand image at the local level. Early on, it is imperative to reinforce the brand image continually to the franchise system in order to keep from diluting it over time”. If care is not taken at every step, preventing brand dilution becomes difficult for the franchisor. Therefore, he should continue to make efforts to ensure that brand dilution does not take place.

Related: IPO and M&A: Adding Value To Franchising

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