I recently spoke to a group of franchise owners in New York. They had some interesting comments about the franchise business. Long story short, they did not make owning a single franchise sound too appealing.
The owners went into detail covering everything from fees, contracts, decorating to advertising and marketing.
This got me thinking: What is it you are buying when you invest in a franchise? I’m sure there are much more elaborate answers, however I believe you are getting four primary things.
1. Processes and Systems
2. Marketing and Advertising
3. Bulk Buying Power
Most successful non-franchises have the first three covered but branding seems to be what usually falls short with most non-franchise businesses.
Why is branding so important?
Because people buy what they are comfortable with. Think about it, the last time you went to a Subway sub shop was it because the food is so incredible or was it simply because you knew what to expect at a Subway? Did the awkward deli next door with the 400 meat posters in the window leave you a bit more cautious?
People are inherently afraid of the unknown; they stick with the familiar. Branding with good design builds a comfort level for consumers. Even if the brand is unknown, a professional logo, graphics and presentation create familiarity and give an idea of what your experience may be.
Philosophically, the concept is unfortunate because it removes new experiences from the life equation — and new experiences are what we remember the best. For example, you clearly remember that pizza place you went to on vacation four years ago but you cannot recall your 412th experience at Pizza Hut a week ago.
So, why does branding usually fall short?
Because owners have trouble understanding branding’s value. People consider the brand to be part of marketing and advertising, however this is incorrect. The brand is the organization, its definition, its heart and soul, the gut feeling someone has about Subway, McDonalds, Disney, GE and all the others. The marketing is what communicates the brand to the public.
Many business owners have trouble understanding brand because the ROI is not directly quantifiable. How much will I get back if I spend X on branding and there is no direct answer to this question, and clients don’t like that. Unfortunately here at GrafiQa, we often separate clients into the ones who understand brand and the ones who don’t because our experience shows that education on brand importance only works with some.
We believe the brand is even more important than the product or service itself because it truly is the product or service. The organizations that have brand or are lucky enough to stumble upon a brand can have exponential success.
Franchise fees to start up a location can be hundreds of thousands of dollars, the agreements are ironclad and leave you very little room if things don’t work out like you planned.
But if you successfully put together the right combination of process, marketing and branding, a franchise may be unnecessary. It could even be more of a burden than anything else. If you can establish the processes, have a feel for marketing and can build a strong brand you may be better off on your own. And one day, you may be the franchiser instead of the franchisee.