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Advisory 2009-12-10

Slow and steady wins the race

Newly established franchisors always aspire to make their brand world famous. In their urgency to reach their goals they tend to expand rapidly without proper groundwork, which could be hazardous at times. This can also lead to failure sometimes. Read on

By Abha GaryaliSub Editor

Every business man aims for expansion. Franchising is a platform that gives enormous opportunity to the business holder to outspread and expand their business. As Shahnaz Husain, Chairperson and MD, Shahnaz Husain Group says, “Franchising is the core of every successful business and success of Shahnaz Husain brand was possible only through franchising. In fact, the fast paced expansion is due to the franchise system. Initially, our franchise system was not a consciously conceived idea or decision, but later we realised that it offered distinct advantages in terms of business expansion.”

Sometimes it is seen that many businessmen with a successful business may not become successful franchisors. One of the major reasons may be attributed to hurried expansion within short span of time. Many franchisors expand their outlets in distant places where they can not even guide the franchisees and keep a watchful eye. According to Donald Boroian, Chairperson and CEO, Francorp, USA, “Initially the franchisor should never open 10 outlets simultaneously even through franchising.” Therefore opening many outlets together at the initial stage can never be a good idea. The franchisor needs to establish brand identity and recognition before extending the business to distant locations.  Let us now have a look at the various feasible reasons for its failure.

Rapid expansion leading to failure of franchisor

As already mentioned above opening many franchises at far-off places can result in collapse of any business. Some reasons for it are explained below:

Lack of guidance and control: The major reason of failure is lack of proper control and guidance over franchisees spread over at different locations. As the franchisor has to take care of his original outlet, he may not have much time to visit all his franchisees. According to Husain, “Expanding to distant locations in the initial stages is more difficult in terms of keeping in touch with the franchisees and ensuring that it is maintaining the expected standard and that the execution is in sync with the business model.”

Insufficient groundwork: Before letting out any location to the franchisees, the franchisor must explore the feasibility of the product or services of that location. Sometimes in a hurry to expand, franchisors keep adding franchisees in their network without conducting any research of the concerned market.

Improper recruitment of franchisees: The main challenge of the franchisor is selection of  potential franchisees. Franchisees are the backbone of any franchise business. If the selection of the franchisees is not done carefully then the business can suffer a heavy loss. Husain informs, “Consumers today expect a high level of service and professionalism. Keeping this in mind the franchisors have to ensure that their franchisees have a commitment to positive customer experience.” Franchisors should scrutinise each and every aspiring franchisee to see whether he can do justice to the brand or not.

Inadequate training and support: Supposedly a franchisor opens many outlets at distant places at the same time. It will be difficult for him to provide assistance in site selection, project management, layout and interiors, marketing and other standard operating procedures. It also becomes difficult for the franchisee to get equipment sourcing, trouble shooting tips, product planning etc. In such circumstances the franchise cannot run successfully.

Avoid execution of similar training: Franchisors need to understand that every franchisee is different from one another. Therefore, a similar training and support to all may not prove beneficial. Franchisors need to give sufficient time in knowing their franchisees needs and demands at specific point of time and accordingly training should be imparted to the franchisees.

It’s well said that “it is always better to make strong footholds at few places than to make a numerous weak foot prints all over.” Thus to conclude, a franchisor must take note of gaining a strong hold of the parent outlet before venturing out to other locations.

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