TodayÕs global financial crisis has brought dark clouds of uncertainty. This could make the thought of owning a business very scary, especially when you have a look around and all see you see in the media is property and stock going down and job security at an all time low. While this may all be true, when you look at all the facts you soon discover that there is a silver lining to the dark clouds. The question is, what is that silver lining?
Franchising, of course! How do I know this? Well I can share my first-hand experience as a franchisee. Currently my stocks and super funds are down by approximately 30 per cent but my franchise business continues to give great cash-flow and a return on investment of 20 per cent. The reason why I am getting a return from franchising is that franchising as a business format over traditional business has always been proven to weather the storm when it comes to economic crisis.
According to the last American Small Business Administration report, 85 per cent of start-ups fail within the first five years. In comparison, only about 20 per cent of franchises fail within the same period. This statistic is comparable in Australia. With years of experience in the marketplace, an established franchise has eliminated most business failure and error out of its business model. Part of the underlying strength comes from the creation of a respected brand and a proven operating system. These two key elements of business are vital as they create a simple formula for success; there are a set of standards and processes to follow in-order to achieve consistent and sustainable commercial results and growth.
Franchise systems are built on their reputation and values over many years and consumers respect and trust brands that deliver consistently. What this means is that customers already know a franchise brand and product, and with this recognition they come already motivated to buy. A great example of this is McDonalds. Not renowned for making the greatest hamburger in the world, McDonalds has built its empire on the back of being the best at making the most consistent burgers in the world and delivering that product in a familiar comfortable store environment. As we all know, you can buy a Big Mac in Sydney or Beijing and it will look and taste the same. Similarly, you can enjoy that Big Mac in a familiar, clean, safe, branded store environment anywhere in the world. Within most other independent businesses, this critical combination of brand comfort and consistent operating system either does not exist or take years to develop (if ever). However reputable franchises have these proven systems available to their franchisees from day one, thereby guaranteeing the franchisee immediate and valuable momentum and respect within their marketplace.
Small business can be tough and lonely, especially now, and on-going support from experts is a vital part of ultimate success formula. Franchising is about being part of a larger network which ensures that you work for yourself but not by yourself. A network offers full support and the expertise of franchisor staff who have years of business experience to ensure that their franchisees succeed. Comprehensive training programs are ongoing and ensure that the franchise is ahead of the competition. Franchisees, from day one, are trained to know what works and what doesnÕt. They master all aspects of their business operations, marketing and management with professional training.
Finally, I believe that franchising will consolidate and grow market share against non-franchise businesses as it really has the ultimate success formula, it is truly a win-win partnership, a marriage between the franchisor and the franchisees. If the franchisee makes money, then the franchisor makes money — it is that simple. Is it any wonder why franchising will continue to be beacon of light for business and the economy.
Tony Melhem, Franchise Council of Australia deputy chairman and chairman of National Franchisee Forum; contact him at tony@cococubano.com or on 0419 889900.