Advantages of Franchising

Now the big advantages of franchising are time, people and money.

It’s faster because other people are out there helping you in the process. If you are looking to sell franchises, a franchisee is going to go out and find a site, they’re going to negotiate the lease, they’re going to hire the people, they’re going to train the people, they’re going to hire the contractor. They’re going to do all the things that take you a lot of time as a business owner. So that allows you to grow much more quickly because you’re leveraging their efforts.

The second is people; you get really highly motivated in management in franchising operations. The reason why is people have their life savings invested in these franchises. So if they have their life saving invested they’re going to make sure that that unit runs well, that unit is kept clean. That people are operating up to standards. I’ve got a great story about this one, a company called Sterling Optical. Sterling Optical is a New York based franchise company that is like Pearl Vision kind of company. And they originally got into franchising for the first time, decided that what they would do is they would sell their units to their existing franchisees. They had about 200 company owned operations, no franchises. And they did leverage buy out, they wanted to recapitalize. So they thought “we’ll sell these off to franchisees.” Well when they did that, they realized, in order to do this quickly, they would want to start by offering financing, getting these people in there on an aggressive basis, but they also set up a great experiment. Because if you think about it, they’re selling the exact same unit, in the exact same location, with the exact same product, and the exact same pricing, the exact same personnel selling it, the exact same décor, the exact same location. Nothing has changed. The only thing that changes is that one day this person is a manager, the next day the person is a franchisee. Anybody want to guess what happened? The average unit sales went up 32% in those units. So if you think about that, that’s a pretty big jump. But how many times have you been to a store and somebody gives you the wave, “oh we’re closed now.” That doesn’t happen in a franchise. How many times have you had an employee where the employee doesn’t perform up to standards and “well they’re okay, I don’t really want to fire them, they’re a friend.” Especially if you’re a manager and not a business owner, that kind of stuff happens all the time. The passion that you surround yourself with as a business owner also is a part of that process. If I’m a Pearl Vision center or a Sterling Optical franchisee, I’m looking around the room saying “Well this gentleman has glasses, I’m going to want to talk to this gentleman after, I’m sure I can get him a good deal, and here’s a young lady with glasses. I’m always out there prospecting, so what happens is as the unit level performance goes up, the other thing that’s nice about these motivated managers is they’re there long term. You look at KFC franchisees, McDonald’s franchisees, they’re third generation. There’s nobody at McDonald’s corporation that can even hold a lick to that. These people have been there for decades. So they’ve got engraved cultural experience that they’ve been brought up with. So motivated and long term management is a big advantage to franchising.

The third big one and reason why a lot of people get into franchising in the first place is capital. You’ll grow with other people’s money. And that does allow you to grow more aggressively because the cost of getting into a franchise program is much less than the cost of opening a unit after unit after unit for almost any business.