The most important issue for the prospective franchisee is not the big brand versus small brand issue but whether all the elements of the franchise concept, system and package have been proven, suggests Andrew Terry

 A Google search records 30 million more entries for ‘big is beautiful’ than for ‘small is beautiful’. Some balance is restored by the 30 million more entries for ‘size isn’t everything’ than for ‘bigger is better.’

These statistics are, of course, inconclusive, irrelevant  and unhelpful in assessing the proposition that big is better than small – but they do at least confirm that relative size is an issue which attracts much interest across a range of subjects.

Prospective franchisees are among those with a real interest in whether size matters.

The big brand versus small brand issue will invariably, and properly, be a key consideration when assessing a franchising opportunity.  

Does size matter?

Big brands and small brands both have their respective advantages and disadvantages.

Big brands, for instance, have many attractions for franchisees. A big brand will be an established brand.

The system will have a significant track record documented in its Disclosure Document which will facilitate franchisee due diligence in investigating the opportunity.  

The franchisor’s concept, brand, system, training and support structures will have been repeatedly proven through its network of franchised and company-owned outlets.

A big brand can harness the advertising fund levies from its outlets into impressive advertising campaigns and offer real economies of scale to franchisees in purchasing. It should have the expertise and the experience to deal with the inevitable challenges that any business faces.  

On the other hand, a big brand will generally have higher entry costs and, given its geographic reach, there is likely to be less flexibility in available outlets or locations. Indeed, entry into an established system may be through an existing franchisee transferring its franchise rather than through a greenfield or start-up operation.

The acquisition cost in a resale entry is likely to be much higher than a greenfield entry as the price will include the goodwill which has accrued to the established business – but there will also be a trading history which will provide some comfort as to likely future performance.  

Despite the obvious attraction of the big brand to the prospective franchisee, the growth of the franchising sector owes much to emerging brands servicing niche markets.

It is these small and entrepreneurial brands which bring new ideas and new concepts and introduce diversity and innovation.  

Small and adaptable?

This is not to suggest that big brands do not innovate but substantial change is not easy in mature systems.

A new system, a small brand, has the advantage of being able to respond and adapt to new opportunities and changing consumer demands more adroitly.

The small brand offers lower entry costs, wider location choice and even the opportunity to broker a deal that may not be possible with a big brand.  

And don’t forget that one of the longest lasting and most respected taglines in advertising history – “we try harder” — was not adopted by the market leader.

All our big franchising brands started as small brands. Those franchisees who got in early have grown with the brand and have shared in its success.

The unfortunate reality is that there is also a history of small brands which failed to achieve critical mass and which no longer exist. In some cases they have been taken over by the bigger brands which has generally been a good result for the franchisees but there have, unsurprisingly, also been the less fortunate cases.   

Ultimately the most important issue for the prospective franchisee is not the big brand versus small brand issue but whether all the elements of the franchise concept, system and package have been proven.

Big brands sometimes fail. Small brands often thrive.

The informed prospective franchisee understands that franchising success is built on the cloning of proven concepts, system, training and management expertise as well as support, rather than on the size of the franchisor.