Although franchising has been around for some time, there is still some confusion about the true application of it. Similarly, there is more than one application suitable to a number of businesses. You just need to be clear on the differences.

Product and Trade Name franchising

This is a sales relationship between the supplier and the dealer in which the dealer is granted the right to sell products in exchange for fees and royalties and is obligated to sell only the franchisors product. This type of franchising is dominated by petrol service stations, car dealerships and cool-drink bottlers.

Business Format franchising

This concept is what true franchising is all about. It is characterised by an on-going relationship between the franchisor and franchisee and includes not only the product, service and trademark, but enables the franchisee to acquire the right to use the franchisor’s entire business concept. This includes the franchisor’s name, goodwill, products and services, marketing procedures, administrative and operative systems and support facilities.

Note: Companies such as mobile phone distributors operate under both systems. They produce and sell the product and develop the retail outlets for direct sales.  In this way they can sell distributorships as well as franchised retail outlets.

And then there are franchising levels

Master

This is where the business format is owned by one person or company: usually the original owner or developer or whoever holds the Master Franchise for a country.

Regional

• The Master Franchise sells off strictly governed specific regions to a franchisor.

Local

• The franchisor sells a franchise to a designated and restricted local area.

Example:

A Master Franchise held by an individual or company in Australia could sell off a Master Franchise to someone to operate in New Zealand. That person can then divide areas of New Zealand up according to demographics or perceived customer base (or more simply one in each major city) and sell a franchise for each area. Taking it one step further, if their area is large enough, the franchisee could subdivide their territory and sell off strictly regulated selected portions.

License

The Master Franchise holder can sell off the right to operate under a license for a set area or specific portion of the business.

Base Franchise

Campbell Spencer
[email protected]
www.basefranchise.com

Branding is big business. Conversely big business is all about branding. One can’t exist without the other. Today’s consumer is brand and label driven and addicted to trends. If their hero or heroine is seen using it or wearing it, they have to have it.

Ask anyone to name 10 brand names we all know and they will probably do it quicker than it takes to write them down here. Branding is such big business that high profile movie stars and sporting identities can nominate their own fee for becoming the face of an international organisation. Think any industry and immediately you come up with a product and star partnership that is readily identifiable and recognised across the globe.

Part and parcel of this branding phenomenon is market research. Successful companies spend as much on market research as they do on developing new products. It is all well and good to have a great new idea or product but if it does not look or feel right for the intended end user the best idea in the world will not get off the ground. History has proven time and again that it is often not the product that is lacking but the way in which it is packaged and promoted. A talented marketing guru can sell almost anything by packaging it to appeal to its identified target market and launching it at the right time and place.

Perception is everything. If we think others approve of it, if people we admire or aspire to be like are doing it or using it, we believe that we only have to own it to be equally successful or attractive. At the very least some of it might just rub off. There is also an element of comfort in having our choices endorsed by someone we perceive as being successful. In every level of our society we are encouraged to be competitive and yet hungry for acceptance. This common trait is easily manipulated. Branding keeps us striving for the next new and best product and peer groups support this by endorsing it and putting subtle pressure on each other to conform.

On another level it also meets the same needs as multi-level marketing. We all enjoy a sense of ownership and like to share whatever we enjoy with others. Each new movie, CD, restaurant or designer label we find, we want our friends to know about and support our choices. Recommendations are the safest way to try something new.

Putting all this into franchising terms, once a brand has been established it has a strong following of tried and tested loyal customers. All the hard work involving market research and product testing has been done for you. Instead of going blind into unmapped territory as a pioneer you are following in the footsteps of an existing business with an established customer base. Customers know that they can step into your store or use your service anywhere in the world and it will look, feel and deliver the same product.

Campbell Spencer
www.basefranchise.com
[email protected]