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Franchising – The Advantages And Disadvantages Of Franchising Business

Franchising

Franchising has always been an old strategy for brand expansion. A particular fast-food enterprise that has been around since the eighties – my earliest memories of this place dates as far back – has since gone to the dogs.

See Also: 10 Ways to succeed as a franchise owner.

What happened? Where did they miss it?

Start Your Business in 30 Days Even If You Don't Have An Idea
Start Your Business in 30 Days Even If You Don’t Have An Idea

I’m sure their problems began when they decided to franchise the business.

That is not to suggest that franchising business is necessarily a bad thing. Over the years, Nigeria – Lagos – has been the beneficiary of several international franchise businesses. Mega stores, mobile network service providers, clotheslines, designers, sneaker lines, IT companies, smartphone companies – the list is endless.

These franchise businesses have flourished, even more than they’d hoped, more than they make in their home countries. Several reasons are responsible for that: a lack of competition, lax rules and regulations, hardly any product quality standard nor proper regulatory bodies, and so on. That is not to say the nation/state also hasn’t benefited hugely; one major thing to consider is the number of jobs these franchise businesses provide.

See Also: The difference between franchising and entrepreneurship.

Franchising business is smart business. It allows a business or brand to expand to places the original owners may not be able to get to, making them a tidy sum of money while at it. The benefits are not one-sided, however. The franchise buyer latches onto an already established brand name and customer base as opposed to building from scratch. He also has the support of the brand in structure and design. All of those decisions are already made for him. He also has several pre-established business relationships to latch onto and learn from. His part is mostly to maintain the standard of service/product/brand; to stick to things like brand colors, brand behavior, and so on. Not strictly adhering to the rules may result in the franchise being pulled. Money is lost.

Franchising business is not always such a hot idea as it also threatens a drop in the quality that brand consumers are used to. Sometimes it takes a while before the customers/consumers of the brand become aware of the fact that their favorite brand is now a franchise and might boycott the brand because of a nasty experience at one outlet. In the instance of the fast-food business mentioned earlier, people noticed an inconsistency in the quality of service and facilities from branch to branch. Some of the branches don’t have working restrooms, some are filthy – all sorts of complaints; down to shabbiness and lassitude on the part of the employees. This kind of perception affects the brand as a whole because the most effective form of advertising is still word of mouth.

See Also: 100 Profitable business ideas to start now for aspiring entrepreneurs and investors.

Isn’t there supposed to be a regulation, an acceptable standard to guide the franchise buyers? Aren’t there supposed to be checks and balances that protect the brand name, brand owners, and brand consumers? Who are the brand custodians and what exactly is their job description?

It’s bad business when a brand that has an enduring name suddenly starts losing steam and quality. Or is it just a Nigerian thing? But there are several international brands that have made their homes on these shores and yet still maintain international standards. International businesses like KFC, Adidas, Nike, Converse, Apple, Shoprite, Nokia, Samsung, and several others have franchise owners here and, yet, there’s a standard they abide by. And maybe it’s not the same thing, fast foods, and smartphones. But even in the store displays, there are regulations to follow. For instance, there’s a certain way a MacBook can be displayed, a certain color an Apple consultant can wear.

See Also: Businesses you can start with less than 100K.

While mismanagement of brand name is the biggest franchise disadvantage for the brand owner in franchising, the buyer also has his own problems. Some of them lie in the continuing payment of royalties to the owner, sun in sun out – profit or none. Also, as the franchise buyer’s activities affect the brand, so does the brand’s actions affect the franchise buyer. He’s not the one bearing all the risks, but the consequences could be just as devastating. A worldwide boycott of an international brand would most likely affect a local franchise buyer and he might not even know what happened.

Franchising business, like most other businesses, has its challenges. But in a growing economy, it might be the smart business practice as there are several thriving franchises in Lagos, for example. So thriving, in fact, they seem to be suffocating the local competition. But as a Nigerian rapper said: ‘there’s enough space for everyone.’

What are your opinions/experiences with franchising – good or bad business? Let us know in the comments!

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