One of the biggest differences between opening a franchise and creating a stand-alone business is the level of freedom and control that the owner has. Although both business models have their own advantages and disadvantages, people have varying opinions regarding which of these systems is best. But the fact is that both approaches have their perks – and the best one to consider often depends on the individual’s preferences and what they want to put into and get out of the business.
Owning a Business or Franchising: What You Need to Know
Stand-alone owners create each aspect of their business themselves. After a series of trials and errors, they develop an operating system that enables the business to gain new customers and retain old ones. These owners handle everything themselves, from setting up the company to promoting it and creating or choosing systems for inventory, social media, website, and every other aspect of the business.
On the other hand, franchise owners don’t need to create the operating system themselves. In a good franchise system, the franchisor has already tested and proven each aspect of the operating system, which will allow franchisees to quickly start and run their businesses successfully. As a matter of fact, the operating system is one of the things the franchisee pays for when buying a franchise, and the franchisor can demand that they follow the established system.
One of the questions we like to ask prospective franchise owners who come to us for consultation is, “What do you think you are paying for when buying a franchise?” Many people will say they are paying for the brand or the operating system but think they will own the product. No, that’s not true. When you purchase a franchise, you don’t own the product, company’s logo, or trademarks. A franchise is basically a license that gives you (the franchisee) the right to operate using a franchisor’s business system within a particular territory.
The Advantages Of Have An Operating System
Many of our clients have told us that they would like to join a good, proven franchise system, but they don’t want their actions dictated to them. As a new franchisee, you need to know that the value you get from buying a franchise is the operating system – and you should want to adhere to the system.
It helps to have an operating system in place, especially in the first few years of owning a franchise. This is because the franchise owners won’t have to determine what products to offer, what equipment to use, or what type of company branding and marketing messaging they need to reach their audience. The franchise will already put all these in place, allowing franchisees to run their business successfully.
One of the most important aspects of franchising is having a system that helps guide the owners on what to do. However, franchisees still have some control regarding the business operations and can adjust the system as necessary to improve their operations. Although the franchisor offers guidance, it is the franchise owners who handle the day-to-day operations of the business.
Thanks to the new joint-employer ruling, franchisees now have the right to employ and sack workers and determine their employees’ pay and work schedules. This gives franchise owners more control over who works for them and has an impact on their business’s success.
The pricing of the franchisor’s products often differs in various parts of the country since markets are not the same and the franchise owner determines how much to charge the customer. A typical example of this is the breakfast menu at McDonald’s. Many years ago, McDonald’s introduced an all-day breakfast menu in response to customers’ requests to have items like sausage biscuits and Egg McMuffins available throughout the day. McDonald’s found that certain items are more popular in some locations than others, so it won’t be sensible to include every single breakfast item on every of their restaurant menu across the nation. In 2019, the food company announced that it would allow its franchise owners to determine which breakfast foods to offer beyond breakfast hours.
Franchise Systems Are Not Set In Stone
The more comfortable franchisees become operating a franchise system, the more likely they are to suggest or try out something different. If a franchisee’s new idea works perfectly, the franchisor may acknowledge it and even include it as a part of the system.
This is what happened with Subway’s “Five Dollar Footlong” promotion, where customers get a reduced price for the 12th sandwich. This marketing promotion started in March 2009 during the recession and yielded great results immediately since a lot of customers were facing financial difficulties at the time. Sales jumped by 25% within the first 2 weeks of the promotions, with the company making about $3.8 billion in sales across the country by August 2009.
Although Subway has a dedicated team of experienced advertising and marketing experts, the idea for this promotion did originate from the company’s main office. It belonged to a franchisee owner in Miami who ran the promotion five years before to improve poor weekend sales in his restaurant. It was an immediate success and gained the attention of the franchisor, who eventually had the special promotion implemented across all its outlets.
A good franchisor is always on the lookout for ways to enhance the operating system, and one excellent way to achieve that is by receiving suggestions, input, and feedback from the experiences of the franchise owners. The franchisor continuously brings the franchisees’ experiences together, adds them to the operating documents, and provides them to other franchise owners so that the entire system can benefit from them.
