Is it good to discount an initial franchise fee in tough times?

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Grant Garraway is Senior Consultant at the Franchise Shop Pty. Ltd. and he boast dozens of successful franchise developments. From home-based service franchises to multi-national retail operations and everything in between, The Franchise Shop team has been pivotal in the significant growth of many companies. Grant's 20 plus years of experience in franchise chain management and consulting and systems management makes him a trusted and reliable source of specialist knowledge. Grant hold post Graduate qualifications in Accounting and Buisness Mnagegement, and is a regular speaker at Franchise Expo's, and writes for variuos franchise magazines in Australia and New Zealand.

Is it good to discount an initial franchise fee in tough times?

Why wouldn’t you discount an initial franchise fee when times are tough and franchise sales for some brands are harder to come by?

Over recent months we have seen well established brands like Jumping J-Jays and newer brands like Hairdressers on the Move both give away a franchise as part of their marketing strategy.

Do franchisors and their advisors think they have a product which does not respond to the normal economic laws of demand and supply? Everything else in today’s complex economy goes up and down based on supply and demand. Why not the purchase price of a franchise?

I am sure the shopfitters are trying to keep their prices down to keep getting work? We have seen evidence of shopping centre landlords accepting some rents need to come down to keep their shopping centres full. The retail customers are certainly looking for value for money when they shop. I can see no valid reason for initial franchise fee’s being immune from this process.

That doesn’t mean everyone needs to discount. If a franchise network is still meeting its growth budget then no change is needed. Its franchise is clearly competitively priced in today’s market.Other franchisors are adding value to the price. E.G. Being prepared to spend part of the initial fee in additional advertising to help the new franchise owner hit the ground running, or doing additional training, or adding some piece of optional equipment. There are many ways to skin the ‘let’s add value’ cat.

What the tough times demand of a franchisor is they re-evaluate where their brand sits in the now crowded franchisor marketplace and ensure their overall pricing package is competitive and their franchise brand can still grow into the future.

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