Success in franchising dependent upon six factors: report

By Sarah Stowe | 29 Oct 2015 View comments

In IBISWorld's Franchising in Australia report, the market research company identifies six success factors that are most pertinent to the franchising industry. 

IBISWorld has developed 250 general success factors, and believes the following are essential to the success of any franchise business:

  1. Having a loyal customer base – a loyal customer base improves the likelihood that clients will become repeat buyers. 
  2. Having a clear market position – franchisees need to follow the business structure as set out by their franchisor. With a defined market position, the business and its customers can aim for the same target market.
  3. Business expertise of operators – franchisees stand to benefit from the expertise of their franchisor, along with their guidance and leadership, in growing the business model into the future.
  4. Ability to control stock on hand – operators benefit from controlling stock on hand to meet client demand, reduce inventory costs and ensure adequate stock turn.
  5. Establishment of brand names – many franchises have established brand names, and people buying into a franchise license the particular product or service.
  6. Work force – franchisees should ensure that employees have sufficient knowledge to provide sound advice and quality customer service.

THE INDUSTRY'S TAKE

Here, four franchisors share their thoughts around the six success factors. 

Zambrero

Karim Messih, the general manager of Australian-based Mexican food chain Zambrero believes each of the aforementioned factors is important; however he adds business success will only be achieved when these elements operate as one.  

“Each cannot stand in isolation. It is the sum of all parts that creates the DNA of a franchise operation,” he says.

Plus Fitness

Nigel Miller, the director of 24/7 gym Plus Fitness, says these factors are relevant for all businesses irrespective of whether they are a franchise or independent operation.

“The added benefit of a franchise network is that the operator is not solely responsible for all of these [factors], moreover franchisees have the added advantage and sense of security that their franchisor is sharing the responsibility for many of these points,” he explains.

Hairhouse Warehouse

Peter Fiasco, the franchise development manager at Hairhouse Warehouse agrees with all six factors, and two in particular really resonate with him.

“In regards to loyal customers, yes, it is a factor, and franchising is one of the reasons that customers connect to a brand.

“In terms of having a clear market position, this is extremely important, and I believe that the main reason we sometimes see failure among brands in the market is that their offering is either based around a fad or they don’t have a unique selling proposition (USP). If a brand doesn't have a clear USP then the success of a business is more heavily weighted to the operator rather than there being a balance between the brand and the operator," he explains.

Fastway Couriers

Richard Thame, the CEO at Fastway Couriers agrees with IBISWorld’s take on what constitutes success in franchising, and believes it is important businesses change as the needs of the consumer change. 

“As a company, we’ve adapted dramatically over the past few years to meet the needs of online retailers and consequently we’ve really seen this come to fruition over the last 12 months.

“Brand awareness is now at an all-time high, we’ve announced new initiatives such as Parcel Connect, and we’re winning business across the country,” he says.