Franchising VS Business Opportunity

[Naughty Vend]

As some of you may know I am a franchisor in the vending sector.

Over recent years the word franchise has taken on several meanings for different groups based upon their own personal experiences and diligence they may have done, which is not to say that all franchises are bad nor good and it's not that subject I wish to discuss in this thread - that is for another day. Understandably there are many people with very strong opinions out there (and on UKBF) but exactly what do you call a business which is replicable with proven figures, pilots and operators when it is your intention to improve, move forward and learn from mistakes made in the past. The issue being that the very word franchise evokes some prejudicial reactions and yet essentially that is what we do... we franchise our business model.

I've spoken to most existing franchisees and some previous franchisees openly and asked them what they would like to see, ways we could do better and hopefully this has now been acheived with mutual understanding. So the question is what do you call this in your marketing / sales material, is it a franchise, a franchise styled business, a business opportunity or something else entirely. Perhaps there are some preconceptions that a franchise should be an as such major investment in the high five figures or six figures to qualify, maybe anything under ten grand is a business opportunity just resting upon the word franchise for some credibility or indeed maybe it doesn't matter because at the end of the day when your diligence is done if the figures / people in the business don't add up then it's something you should walk away from regardless of the official type or title of said proposal.

This subject was raised at a BFA event recently, I followed it up with a marketing consultant and to be honest we are still in both camps on this subject. What do you feel is the best way forward?

 

[vvaannmmaann]

Why do I need to buy a franchise to sell pizzas or whatever the idea is? Surely I would open up without the extra expense of a franchise?

 

[Billmccallum]

There are both negative and positive reactions to franchises, some are deemed good quality business opportunites and some as rip-offs.

From my perspective, its the people who make the franchise work, all they have to do is follow the successful system that's already been developed.

Why would someone pay £1 million+ to get into a MacDonalds franchise? Because the model works, why are Burger King so successful, because the model works.

Some major franchises do fail, but usually because the person running it fails, not the business model.

The term Franchise is still valid, but its usually the wrong type of person taking on a franchise that leads to failure, usually failing to understand that they still have to manage and promote a business venture, people won't just trun up because you have name they recognise, if you provide crap or employ rubbish staff, people won't come back, no matter what the name above the door says.

 

[filtuh.com]

I'm afraid I don't know enough about franchising.

Can someone answer me this though:

If the model is so good, why don't you just expand the company with new employees directly employed as regional reps? What are the advantages to being a franchise?

 

[Kernowman]

Perhaps the words "Replicated Business Model" could have less of a sting and the stigma than the word "Franchise" seems to have acquired?

It also needs to have the business handcuffs taken off in the requirement for ONLY being supplied by the franchisor and ONLY having the marketing materials etc., being solely supplied by the franchisor at grossly inflated prices.

It is that lack of an equitable balanced relationship that I find a tad distasteful in most franchises., hence I don't feel inclined to recommend the concept under those terms.

 

If the model is so good, why don't you just expand the company with new employees directly employed as regional reps?

Now that my friend is the million dollar question.

Earl

 

[oldeagleeye]

I think that I have a solution to this problem because in many ways the word franchise has become associated with get rich quick schemes like charging some poor fool £10K for a £200 quid steam cleaner and a days course on cleaning carpets.

The word I would use then is Devision.

The new business I am about to launch for instance will only operate in the London & Birminham areas. Each for logistics reasons will be a division under the umbrella of the one company.

If I wanted to franchise out the business model then I could offer Liverpool & Leeds as a seperate "division". Cardiff & Bristol perhaps or Endinburgh and Glasgow.

The benefits of doing it my way are many but in the main I can control the quality of the business model. The cost of Advertising in national trade journals would also be shared.

Hope the info helps.

Rob

 

[Naughty Vend]

Oldeagleeye;

Would this not be the same as 'Distributorship' under another name? We will be supplying but in essence that the partner will want to purchase from us, not be forced to under an overly onerous contract with threats of legal action if you don't play with our skipping rope until your hips turn to powder.

The prices fair, the quality of products and service levels monitored and with a "price promise" and contractual option to buy elsewhere if we let the franchisee down in that regard. Like yourself giving us brand protection and consumer confidence, the balance is though that sometimes when you give people too much control they themselves become the difficult party and do not discuss new ideas with the franchisor before implimentation, I agree with you freedom is a requirement and cost sharing rather than predetermined levy a good way forward but should that not only apply to 'special' costs such as exhibitions etc in agreement with the commune.

What other benefits do you forsee bearing in mind the nature of man generally without prejudice toward the species.


Kernowman;

Those are my sentiments also. I also freely admit that some of our prices could have been lower, however we addressed the problem as soon as our own shackles (in form of a Master Franchise Agreement) were removed, ultimately an agreement we should never have been involved in - it was detrimental to our franchisees in the long term and some are still feeling the effects. Our prices are now 'wholesale' in nature and lower or the same as others could supply in order there is no disadvantge to operators of the brand, we then stir in the advantages...

BillMcC;

Thanks, one of the lessons I have learned personally is to focus upon more selective recruitment not only of franchisees but also the management structure whom may be involved with them directly and indirectly. The ability to 'work with' someone and mutually agree a stratgey is paramount, in an arena where ego and arrogance are destructive forces...

Filtuh & Sire;

Franchising worked well brings on a partner in your business and gives you access to capital perhaps not available via normal channels, I was a director of a national contract cleaning company for many years and vowed never to run a business with such ambition of coverage again without the right structure. Expansion is well funded not only by cash but by people power which when you have by definition a good product which is replicable can easily be mimicked by others, so you need fast expansion to corner your slice of the market. (We've been copied several times and so far they have all failed and / or are in the death rolls).

Why you would spend more for a franchise is as Bill has pointed out but a fundament is that you can operate profitably, even when times are bad you must have a franchisor whom will not strangle you - as a certain Pizza company did to someone I spoke with recently from the Emerald Isle - so V-a-anman does have justified concerns but the key is diligence, understanding what franchising is and appreciating like many others before it there will be a rouge element. Dare I mention the MLM word...

All;

However the question remains that once you have identified these aspects, how do you market that to a potential recruit into your business and find a name to convey quickly what is on offer? I am keen to retain the franchise style structure with 'leans' toward non-traditional outlooks in relation to territory etc., part of the new model is indeed a two-tier commission based system which is of course multi level marketing essentially which I decided to call the "Micro-Business" opportunity.... which describes what it is under a different name than MLM as you would initially see it to be, simply because the structure is the same but the detrimental elements have been removed. As you may know the issue with MLM is the way the %'s work and the operator can't make a profit eventually, so "Micro-Business" covers that part but still I am wondering what on earth to call the main business, an umbrella phrase which retains the professional mind's eye image of franchising but also conveys the message... "...but now with less bad bits". Low Fat, Low Sugar but for a business...

Let's not get drawn into the problems with some franchise opportunities and assume if you will that they've been resolved, our discussion here is to find a new set of terminology to deliver a message to the consumer that this is the new type of franchised business / opportunity you want to be part of, at least take a look at.

 

[garyk]

I'm afraid I don't know enough about franchising.

Can someone answer me this though:

If the model is so good, why don't you just expand the company with new employees directly employed as regional reps? What are the advantages to being a franchise?

Simple, because in many cases the model doesn't work! It has been completely unproven and there are numerous examples of this.

 

[Kernowman]

Let's not get drawn into the problems with some franchise opportunities and assume if you will that they've been resolved, our discussion here is to find a new set of terminology to deliver a message to the consumer that this is the new type of franchised business / opportunity you want to be part of, at least take a look at.

I refer the honourable gentleman to the first line of my response in post #5

I was racking my brains to find a word that meant an offshoot, bud, replication, seedling, cloning, duplication, or anything along those lines that wouldn't sound twee or contrived just to avoid the word "Franchise", yet still head towards the notion that it is a replicated business model you are offering AND be accepted as such by your prospects without being misconstrued.

A big cup of coffee and some lengthy cogitation is in order for this one

 

[Naughty Vend]

I refer the honourable gentleman to the first line of my response in post #5

I was racking my brains to find a word that meant an offshoot, bud, replication, seedling, cloning, duplication, or anything along those lines that wouldn't sound twee or contrived just to avoid the word "Franchise", yet still head towards the notion that it is a replicated business model you are offering AND be accepted as such by your prospects without being misconstrued.

A big cup of coffee and some lengthy cogitation is in order for this one

Absolutely, with brandy in it by the fire down the local...

...it's damn cold outside today. There's a roast beef with my name on it somewhere, sure of it.

 

[vvaannmmaann]

A re-branded,re-named,re-packaged franchise is still a franchise though isn't it?

I saw one last week.A franchise to "advise" private landlords as to the legalities of being a private landlord. "No legal training required" etc etc.
They wanted £25k for my post code area.OTE 0f £60k.
Would the OP buy into that?

 

[Psl]

As some of you may know I am a franchisor in the vending sector.

Over recent years the word franchise has taken on several meanings for different groups based upon their own personal experiences and diligence they may have done, which is not to say that all franchises are bad nor good and it's not that subject I wish to discuss in this thread - that is for another day. Understandably there are many people with very strong opinions out there (and on UKBF) but exactly what do you call a business which is replicable with proven figures, pilots and operators when it is your intention to improve, move forward and learn from mistakes made in the past. The issue being that the very word franchise evokes some prejudicial reactions and yet essentially that is what we do... we franchise our business model.

I've spoken to most existing franchisees and some previous franchisees openly and asked them what they would like to see, ways we could do better and hopefully this has now been acheived with mutual understanding. So the question is what do you call this in your marketing / sales material, is it a franchise, a franchise styled business, a business opportunity or something else entirely. Perhaps there are some preconceptions that a franchise should be an as such major investment in the high five figures or six figures to qualify, maybe anything under ten grand is a business opportunity just resting upon the word franchise for some credibility or indeed maybe it doesn't matter because at the end of the day when your diligence is done if the figures / people in the business don't add up then it's something you should walk away from regardless of the official type or title of said proposal.

This subject was raised at a BFA event recently, I followed it up with a marketing consultant and to be honest we are still in both camps on this subject. What do you feel is the best way forward?

You have a proven business model so why not call it a licensed business opportunity?
Like you have pointed out if the figures don't stack up after due diligence is undertaken then it doesn't matter what you market it as.
You will never be able to change peoples preconceptions about franchising.

 

[Kernowman]

Absolutely, with brandy in it by the fire down the local...

...it's damn cold outside today. There's a roast beef with my name on it somewhere, sure of it.

Transcribed Associate.

Invoice is in the post LOL

 

[Naughty Vend]

You have a proven business model so why not call it a licensed business opportunity?
Like you have pointed out if the figures don't stack up after due diligence is undertaken then it doesn't matter what you market it as.
You will never be able to change peoples preconceptions about franchising.

Yes that's the general direction I'm leaning toward as well, it is still formal and keeps us above the 'bar' of the business opportuinity preconception but distant enough from the franchise preconception...

 

[Naughty Vend]

A re-branded,re-named,re-packaged franchise is still a franchise though isn't it?

I saw one last week.A franchise to "advise" private landlords as to the legalities of being a private landlord. "No legal training required" etc etc.
They wanted £25k for my post code area.OTE 0f £60k.
Would the OP buy into that?

We're not rebranding or renaming though 'vanny' and essentialy it was built as a franchise and will always have that within it, but re-structure can sometimes be good for any business and the suggestion of licensed business opportunity is I guess honest in stating exactly what it is and doesn't used the word franchise. Certain aspects of which we shall be removing entirely...

As to the advice for landlords, no I would not buy into that personally for no other reason than landlords whom want advice will use a professional agent nine times out of ten to manage the property in their portfolio. That's what I do, and I couldn't imagine £60k being attainable when you consider a management agent will levy between 8% and 12% of the rental income, so in comparison you'd be looking for clients willing to listen to the tune of about £750,000 in rental turnover whom wish to self-manage their property for the same cost as using an agent in the first place. For them to make a saving (i.e. have benefit) the comparitive rental turnover would be in the £millions per annum, bearing in mind that sixty thousand OTE is a gross income. Doesn't stack up realistically but were you asking my advice or are you about to make a point?