Understanding the WHY of Franchising from both the Franchisor and Franchisee perspective is critical for the success of both parties. The more aligned, the more successful the relationship will be which means greater financial success for both parties.
WHY Become a Franchisor
- You believe your concept can be successful in other locations/markets
- You want to leverage franchisees’ capital to grow the concept directly
- You want to leverage franchisees’ knowledge of other locations/markets
- You want to leverage franchisees’ infrastructure and connections in other locations/markets
- You aspire to create a corporate entity for further growth or sale
- You believe that time can be better spent on creating other concepts or business opportunities
Certain aspects may have more relevance depending on the situation/size of the potential franchisor
WHY Become a Franchisee
- You have limited desire or knowledge to create a successful concept/brand
- You want to purchase a tested concept complete with
- Sales & Marketing platform/systems
- Financial platform/systems
- Operational platforms/systems
- Human Resources platforms/systems
- You want to leverage the franchisor’s knowledge and loyal customer base
- You want to be part of something “bigger” instead of going it alone
While the concept of franchising is somewhat consistent there can be vast differences in the structure, cost and deliverables between fast food, fast casual, casual, and up-market/celebrity chef driven concepts.
Fast Food franchises the likes of McDonalds, Kentucky Fried Chicken etc. typically have a well-developed system where almost everything is included (bar the actual running of the day-to-day operations). This includes design services, fit out, supply lines, regional/global marketing. This all comes at a price which is typically a higher franchise fee and ongoing royalty fee in addition to marketing fees. These chains have also already realised the importance of local customization allowing the addition of products suiting the local taste alongside the core offering. Whilst expensive the upside is that you are typically buying into a very tried and tested product that has withstood the test of time.
Fast Casual/Casual can fall into two camps. For the bigger well-known brands (often with an International footprint) they may operate similarly to the main fast food franchises where you can expect substantial ongoing support and the controls that come with this. Depending on their time in market and global spread they may be less flexible about menu localization. Such franchise are typically suited to more developed operators who may already have multi units and wish to continue growing without R&D costs.
The second camp is the more home grown concepts which are unlikely to be at this level however should offer the base line deliverables of concept, design, menus (which may only be changed bi-annually or even less), manuals, moderate opening assistance and an ongoing level of support and control measures. Such franchises are typically suited to owner-operators who wish to become their own bosses and either have a passion for the concept and/or see a significant opportunity in their specific market location.
With our third category of Up-market or Celebrity Chef driven concepts we see again similarity with the structure/controls associated with fast food however in most cases without the localization. This is not surprising as you’r typically paying for a well-defined and targeted product. However, it can also be a challenge as the concept ages. Higher-end franchises will typically have larger fit out costs and ongoing running costs. Many such brands will also require involvement in either placement of one of their trusted chefs/managers or involvement in selection and approval of this position. In most instances these costs are countered with a significantly higher average check.
When looking specifically at Celebrity Chef brands it’s important to understand the ongoing involvement of that Chef with your particular operation. If you expect to see them personally on an annual basis, this will often incur significant additional costs such as an appearance fee, first class travel and accommodation. The alternate situation is where the Celebrity Chef is the face of the brand (and sometimes the name on it as well). As a franchisee you can expect their involvement in seasonal or annual menu updates, their image on marketing pieces and, if lucky, a visit if they happen to be in your country/region. Once again franchising an up-market or celebrity chef concept is typically suitable for those who already operate or have been involved in a similar style operation. Given the usual significant set up costs they are often suitable for hotels where the concept or chef’s name brings added attention to the property and assists to raise the status of the hotel as well.
A Franchise For You?
Inevitably there is a franchise model or concept that can suit your situation. The most difficult factor is finding that perfect franchise tree within the forest of offerings. As with most franchises, the responsibility of market due diligence lies with the potential franchisee and although a franchisor worth their salt will not franchise to a location they feel is inappropriate (after all a failed franchisee benefits no one) they can often be convinced by the potential franchisee or driven for quick growth at any cost.
Having operated as a Franchisor, Franchisee and Franchise Agent, such perspective allows Rebel Hospo to assist you in your search for a suitable franchise or to further develop your own concept for franchising. We work with you to consider if the franchise or franchisee is well aligned to your needs and expectations to create a successful business and ongoing relationship.
Contributed by Gary Clarke, Food & Beverage Director The Hermitage Hotel, Aoraki Mt Cook. Ever…
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