Nov 12, 2007

Franchising not a Panacea

As the new era of Retail moves inexorably towards dramatic reinvention of customers' total experiences, there is more and more talk about franchising as a mechanism for accelerating new business model implementation. For retail mdoels heavily dependent on local market services and high-touch customer experiences, franchising is a useful path to generate the sustained committment and leadership requried on a store-by-store basis.

But franchising is not without pitfalls, and it isn't right for every channel design situation. Cyndia Zwahlen writes that it's important to know when franchising isn't a good idea:

The business is new. You may think you have a concept that's perfect for franchising, but experts recommend that you run your shop for a year or two to get an idea of whether you can turn a profit.

The sizzle factor is missing. A unique concept is usually important for success, whether it's the product or the business model. It helps if there are barriers to entry by other companies.

The founder is key to the business' success. If unique personality or skills are not transferable to potential franchisees, you may need to rethink plans.

The concept won't travel well. [Some] concepts may not succeed outside its home region.

Expectations are unrealistic. It [typically isn't] logical or practical to hand out franchises to whoever wants one

No comments: