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Why Would You Franchise Your Business?

Franchising is a broad-based definition used to describe an independent distribution channel.  It is a market that has become an industry by which business models are replicated through entrepreneurial relationships which share proven business models to energetic and enthusiastic entrepreneurs looking for an opportunity.  Franchising a business allows a business owner to acheive the following benefits:

1. Growth with less capital.  When you franchise your business, the franchisee makes an investment in the business.  They will build a location if required, fund the local marketing program and spend the capital needed to get the business off the ground in their market.

2. Infusion of energy and entrepreneurial mindsets into a growing business.  Many of the best ideas in franchised businesses came from the franchisees who had bought into the system.  Whether it was new technology, marketing, logistics management or the egg mcmuffin, franchisees have helped franchisors build more efficient and profitable businesses for years.

3. Benefit of gaining local “feet on the street”.  Franchising works effectively because the franchisee, if chosen correctly, will be someone who has influence, experience and a network already established in the market they are opening their business within.  An ideal franchisee brings an established network from which to build a customer base and an understanding for how the local market works in order to get the franchised business off the ground in as short of a time period as possible.

4. Speed of Growth – Franchising typically allows for a business to open 3-10 new units per year on average during the initial phases of growth.  In later years, as a franchise system matures, larger networks can open and add as many as 300 or more units in a single year through franchise distribution systems.  Franchising allows for fast growth over long distances in far away markets.

5. Operational Efficiency – Why is it so difficult to manage employees in locations that are farther away from home base?  It’s simple, when there is no one with an ownership stake in the business operating the location, the business will never operate as efficiently.  Franchised units have consistently outperformed company-owned units in many franchise systems including Dunkin Donuts, McDonald’s and others.  Franchisees have put their own capital into the business and want to see as much profit as possible come back to them for their investment.

 

Why franchise your business

Not all businesses can or should enter the world of franchising.  For an initial consultation and discussion regarding whether your business is ready for franchised distribution, contact us:

info@franchisemarketingsystems.com

(800) 610-0292

The Chick-Fil-A Franchise Story

Chick-Fil-A Franchise

 

Chick-Fil-A is an extremely successful and consistent franchise system.  The privately held chain did over $2.5 billion in systemwide sales in 2009 from over 1,300 franchised stores in the U.S.

Chick-Fil-A franchise

The founder of Chick-Fil-A, Truett Cathy, 88, credits the company’s success to over 1000 franchisees and over 600 employees who are unusually dedicated in an industry known for grumpy operators and high turnover among hourly workers. The turnover among Chick-fil-A franchise operators is an extremely low 5% a year.  Among Chick-fil-A hourly workers turnover is 60%, compared with 107% for the industry.  Chick-fil-A focuses on hiring and bringing in franchisees who are looking for lifetime commitments to the company.

That’s not the only company mandate. Chick-fil-A’s corporate mission is to “glorify God.”  It is the only national fast-food chain that closes on Sundays which allows franchise operators to go to church and spend time with their families; franchisees who don’t go along with the rule risk having their contracts terminated which is unusual in today’s “bottom line” approach.  Chick-fil-A’s approach is to balance life with work which seems to be working.

truett-cathy-chick-fil-a

Many of the Chick-fil-A franchisees have come from the foster homes run by a nonprofit organization Chick-fil-A funds, the WinShape Foundation.  The upfront franchise fee for a Chick-fil-A is only $5,000. Most franchise systems require net worths in excess of $500k and upfront franchise fees of $35k or more.
The structure of the Chick-fil-A franchise from a business model is unique also.  Chick-fil-A pays for the land, the construction and the equipment, they then rent everything to the franchisee for 15% of the restaurant’s sales plus 50% of the pretax profit remaining.  Operators are discouraged from running more than a few restaurants will typically take home about $100,000 a year on average from a single outlet.

Chick-fil-A Franchise

 Truett Cathy is extremely particular in who he selects as franchise operators.  He wants married workers, he would like them to have attended Christian-based relationship-building retreats and Chick-fil-A will even interview family members of prospective operators.  They would like to learn more about candidates and their relationships at home. “If a man can’t manage his own life, he can’t manage a business,” says Cathy.
How is this legal and why does it work so well for Chick-fil-A?  The structure is based on core beliefs and principles which are consistent throughout the franchise system.  Whether it is legal is open for debate, but the bottom line is that in franchising, the rules are different than in employment law. There is much more freedom in who is selected and why as opposed to hiring an employee where religion and marital status are to be left off the table.