One of the most frequently asked questions is, “Why would anyone ever buy this franchise?” This question is usually followed by a series of observations. “Anyone could do it.” “There’s nothing to this business.” “I don’t think this business can be franchised.” And of course, the final underlying question, “Why wouldn’t someone simply do this themselves?”
Their concern is a valid one. Some concepts are simply not well differentiated. Moreover, some of them have low barriers to entry. So can a business that is not unique still franchise successfully? And if so, how?
1. The Mindset of the Entrepreneur.
Whenever I hear these questions, my first response is to point to some of the undifferentiated concepts that have achieved high levels of success in the marketplace. Maid services. Lawn care. Carpet cleaning.Temporary and permanent placement firms. And the list goes on and on.
The fact is, a significant number of franchise companies are in industries in which their products or services are not readily differentiated. What these questioning entrepreneurs fail to understand is that, as entrepreneurs, they are the one group on earth that is perhaps the least suited to understand the mindset of the prospective franchisee. The typical entrepreneur is someone who never saw a rule he or she did not want to break. And, in many respects, the entrepreneur is often the last person you would want to be a franchisee. The best franchisees are not the rule-breakers. And, in fact, the truly entrepreneurial are often the least inclined to buy a franchise. The best franchisees are motivated adopters – people willing to accept some level of risk, but people who nonetheless are willing to follow the rules established by their franchisor. But if the franchisee isn’t buying your “secret recipe,”what exactly are they buying? Ultimately, what the franchise prospect is buying is a combination of two things: a strong value proposition plus a unique market position.
2. Developing the Value Proposition.
If you are thinking about franchising a business that you feel isn’t particularly sexy or unique, chances are, you have already watched a number of your competitors come and go. Why did they fail, while you survived with a similar product or service? The answer is the system.
The system is the embodiment of all those things that make the ultimate difference between success or failure. Site selection. Lease negotiation. Advertising. Customer service. Branding. Positioning. Purchasing.Pricing. Merchandising. Hiring. Training. Managing. Quality control. Financial management. It can be found in everything from the products you buy to the way your people answer the phones.
When someone buys a McDonald’s franchise, they aren’t doing it because they want the recipe for the “special sauce” on the Big Mac. In fact, they probably aren’t doing it because they believe that McDonald’s serves the world’s finest hamburgers. But few would argue over the quality of their systems – which are among the best in the world. The best companies not only have developed their systems, but they use those systems to ensure consistency at the consumer level. And that is what your franchisees want to buy – a consistent consumer experience that has been proven in the marketplace.
And your job, as the franchisor of an undifferentiated concept, is to show the franchisee how to replicate your success. Through some combination of services and support, you need to teach your franchisee how to achieve what you have achieved. That will likely mean the development of training programmes, operations manuals, site selection criteria, advertising guidelines and other elements of “the system” that will allow your franchisees to take advantage of the intellectual property you have developed over the years. Moreover, you will want to provide your franchisees with the benefits of your labour and your relationships – the brand, your purchasing power, etc. – that you have developed over the years. Combined, these elements constitute the value proposition that your franchisee will pay you for. But the value proposition alone is not enough.
3. Positioning your Concept
Even the most mundane concept can work as a franchise if it can be replicated. But if your system does not have that special sizzle, you may have to work hard to sell it.
For those few concepts that are fortunate enough to be“first movers”, their first position in the market can be enough – assuming, of course, that they grow fast enough to maintain brand dominance. But for the rest of the franchisors out there, a value proposition alone will not be enough. The concept will need to be differentiated from others in the market placeif it hopes to achieve any significant level of success. Let’s take another look at McDonald’s. On its surface,especially in the early years, it was a simple concept – basically, hamburgers and chips with drinks. And for years after they started franchising, dozens of franchised competitors came and went. All, that is, except for a select few.
Burger King realised McDonald’s had staked out the “fast burger” segment in the market and knew if it were to compete with McDonald’s,it had to differentiate itself in the eyes of the consumer. So it adopted a position that McDonald’s could not attack: “Have it your way, at Burger King.”The genius of this position was that Burger King had staked out a position to which McDonald’s could not competitively respond. Burger King’s operating system differentiated it from McDonald’s, and McDonald’s was not in a position to revamp its operating system to respond to this new threat. And Burger King prospered. Over the years, more competitors came and went.
In order to succeed in franchising – especially if you are in a commodity-type market – you simply have to differentiate your concept from those of your established franchised competitors. That differentiation can come at the operational level (as in the cases of Burger King), in the form of marketing or in a number of other forms. Some concepts differentiate themselves in the eyes of their franchisees by offering a lower investment franchise package (a double-drive thru hamburger operation is less expensive to build and operate than is a Burger King).
Others differentiate based on services: both high and low. Some franchisors tout their high levels of service. Contractually, franchisors can differentiate themselves through a more liberal contract, through reduced fees or royalties (not a particularly good strategy, in most instances), through a bigger territory, or through different support services.
4. Be Best at Something
In fact, there are numerous ways for franchisors to differentiate themselves and excel in the marketplace, even if they have a relatively undifferentiated consumer offering. But if you want to capture a long-term market position, you need to be perceived as being the best at something.
A retailer needs to be the best at something in order to survive in today’s competitive marketplace. He/she has to be best in one of five essential areas in order to “win” in the retail game:
- Biggest: a dominant assortment
- Cheapest: lowest prices
- Easiest: high-service orientation
- Quickest: fast-service orientation
- Hottest: fashion orientation
Moreover, the theory states that while retailers can choose to be two of these at once, they will make a big mistake if they try to be more than two. They hold that the strategy of trying to be everything to everybody leads to a lack of position and a downward spiral in the market.
In franchising, especially when it comes to commodity-oriented concepts, many of these same principles apply. Over and above the need for a strong value proposition, the best franchisors will actively seek to command their desired position in the marketplace. One thing is for sure: If you don’t know how you want to be positioned in the marketplace, your prospects may end up being educated on your position by your competitors. And that is generally not a good strategy for sales success.
3 Tech Trends Your Franchise Should To Keep Up With During The 2018 Restaurant Revolution
For the first time in history, the majority of consumers are – arguably – more interested in how they buy instead of what they buy, according to research. Catch up quickly by responding to this in three ways.
How many ways can you customers choose an item, order it and pay for it in your restaurant? Mike’s Kitchen, Spur, The Baron, and other sit-down restaurant franchises across South Africa have widely started accepting mobile payments using the Zapper app. If you have too, you’re on the right track, because convenience reigns in the restaurant industry, especially where trends are concerned, for your current and future customers.
“In the last two years, there’s been a 50% increase in restaurants using technology. Almost 80% of guests say restaurant tech improves their guest experience, especially when it makes service faster,” according to a recent study focusing on diners and technology.
Here are three of the top trends influenced by consumers’ mounting affinity for experience over your menu items, décor or prices:
1. Self-service via touchscreen kiosks
Who wouldn’t appreciate skipping the queue and enjoying a consistent enhanced ordering experience? Add rich imagery and food customisation capabilities and you can see why self-service is poised to make a huge impact on the QSR industry in 2018.
While kiosk aren’t a new form of technology, combined with loyalty programmes, touchscreens for mobile order pick-up and – in the near future – facial recognition to identify and service customers accordingly, they’re about to become a mainstream addition.
What’s in it for you though? Well, besides happy repeat customers, your order accuracy will improve and staff will be free to attend to more strategic activities within the business.
2. App-enabled ordering and pick-up
Research by QSR Web found that digital restaurant ordering is growing 300% faster than dine-in traffic.
Because “restaurant consumers are aggressively gravitating toward concepts that offer the greatest level of convenience and control across ordering, payment and distribution,” according to analysts from Wells Fargo, mobile ordering technology requires your franchise to go a level higher than its current system.
Consider implementing features such as dedicated drive-thru lanes to for app orders. Or what about outdoor locker systems activated by a mobile phone, enabling a customers to receive their order without interacting with restaurant staff?
3. Analytics aiding personalisation
Even better than mobile ordering though, is using AI to leverage apps including Facebook Messenger or simple SMS to take customers’ orders, for a personal touch. Not only does the chatbot record orders, but based on individual customer data, it’s able to predict what they may choose to eat based on various factors including age, gender and even mood.
If you’re wondering how the mood is detected, fried chicken giant and search engine firm Baidu have established the answer: Facial recognition technology piloted in Beijing that predicts customer orders based on their face displayed in the kiosk screen.
“Restaurant technologies that capture data, such as customer orders and preference will businesses better understand their target audience. Hence, they will be used extensively in 2018,” according to Indiez, the company that developed Domino’s pizza’s app.
How To Start A Funeral Business
Running a funeral business can be lucrative, but you must determine whether it’s the right venture for you.
In South Africa, burial remains the most popular end-of-life choice.
“Just how many burials take place is difficult to measure because there is a formal and an informal funeral industry in South Africa,” says Rey von Ronge, secretary of the National Funeral Directors’ Association, an industry watchdog organisation specialising in resolving disputes between undertakers and the public.
This following guide explains how you can open your own funeral home in South Africa and covers these topics:
The Pros & Cons Of Owning A Restaurant Franchise
Do you have what it takes to be a successful restaurateur? Our franchise expert offers some words of wisdom.
There are many different types of business format franchises, but when most people think of a franchise business, their first thought is of food. The success and growth of the many big brand-name fast-food franchises makes this a logical first stop in the thinking process.
When evaluating restaurant franchises, you must focus on the characteristics of the business from a franchisee’s perspective to determine whether this industry is the right one for you.
There are some wonderful advantages to having a food business, but there are also some challenges you need to be aware of before proceeding in this industry.
In assessing a food business, the main advantages are typically considered to be:
Consumers have been trained to look for franchise food outlets, which can represent a big advantage for a start-up. You need to make sure the product offering of the food franchise has “staying power” in the marketplace rather than being a fad or fringe product.
Ease in Financing
Traditional lending sources are very familiar with the real estate and equipment needs of a prepared food operation, which may ease the challenge of obtaining start-up financing. These sources also like the relatively high revenue production of a typical food franchise.
Track Record of Success
Many food franchises have multiple units and have been operating for a while, making it fairly simple to determine and verify their track record of success. That can help you make an informed decision about the business prior to getting involved.
Whether valid or not, many people associate a high degree of glamour with a person who owns a food franchise business. The fairly high degree of status associated with this occupation is important to many prospective franchisees.
In assessing a food business, the main disadvantages typically include:
High Initial Investment
Most food franchises require a significant investment to get started. Food preparation stations, sinks, stoves and ovens, grease disposal systems, venting requirements, customer seating and bathroom areas – the list goes on.
Zoning and Code Compliance
The government tries to ensure that any food business meets numerous codes and guidelines so the food product is safe for the public to consume. Complying with these regulations can initially can be time consuming.
Virtually any food franchisor will provide extensive assistance to a new franchisee in terms of dealing with zoning, permits, code compliance and all other site-related issues, because the new franchisee probably doesn’t have a clue how to do this whereas the franchisor has lots of experience on these matters.
If a food franchisor doesn’t offer extensive support on these matters (you can determine this during your conversations with existing franchisees), pick a different one.
Related: 10 Business Ideas Ready To Launch!
Most food businesses require the services of a significant number of low paid employees to conduct their business. Turnover of these employee positions is normally very high, and recruiting and retaining a sufficient number of acceptable quality employees is typically listed as the number-one challenge in any food franchise.
Relatively Low Margins
In food operations, the franchisee has both the cost of goods sold and Labour costs to contend with in an environment that is very price sensitive, especially in fast-food outlets. The net margins of most food businesses are not nearly as high as other (particularly service-related) franchises, and you’re also dealing with spoilage, theft and other issues that you don’t find in many other types of franchise businesses.
Quality of Life
As mentioned above, many people associate a high level of status with owning a food business, at least until they understand the facts of a typical food franchisee’s life. The hours can be very long, as you’re often the first to arrive and the last to go home. The Labour challenges can be very frustrating and are the main reason owners cite for wanting to leave this industry. Then there’s also the issue of what a person smells like after spending long hours each day in a food franchise.
The obvious question, assuming you don’t have previous experience running a food business, is “how do you know whether you have these skills and aptitudes?” The best answer, and one that is actually required by a few of the most successful food franchises, is to go to work in an existing unit and shadow the present owner until you’ve gained enough experience to know for sure.
This isn’t going to be a process involving an hour or two – more likely it’ll take at least a few weeks to know for sure. The time commitment involved may seem high, but it is infinitely better for you to find out early (and without risking your life savings) if this business is not for you.
A final consideration related to food franchises is this: Some food franchises run very simplified operations and can provide a business model that avoids a number of the disadvantages listed above. These are typically businesses that don’t involve cooking a product, at least not on site. They may use a commissary system to deliver ready-to-serve products, or products that only have to be assembled in order to serve, to the franchise outlet. These types of businesses, like a Subway outlet, can avoid many issues but almost always still have to deal with the employee issues discussed above.
Give some serious thought to the franchisee role in terms of the tasks required in a typical day or week, the hours worked, the investment and the possible returns. Make sure you know what it takes to succeed and that you possess those qualities. Then you’ll know whether being a restaurateur is right for you.
The secret to success in evaluating any food franchise (or any franchise for that matter) is to clearly identify the skills necessary to succeed, then make sure you either have them or go do something else. The food business can be very rewarding to a person who has the special blend of skills and aptitude to make the business work, and these operators are among the most respected in all of franchising because of their success.