DEFINITION
searchable, digital knowledge base or is a
Franchising is a form of marketing and
distribution in which the owner of a
business system (the franchisor) grants to
an individual or group of individuals (the
franchisee) the right to run a business
selling a product or providing a service
using the franchisor's business system.
Franchisees are also given permission to use
the franchisor's branding, trademarks, and
identifying marks under specified
guidelines. It is important for anyone
deciding to start a business by becoming a
franchisee to remember that in franchising
the franchisee is bound to a partnership
agreement with the franchisor for a defined
period of time (some exceptions do exist).
BENEFITS
When considering if you want to get
involved with a franchise, you need to
weigh all the benefits of franchising, but
also all the potential risks you might face. In
this guide, we’ll outline these pros and cons
so you can decide if franchising is the right
move for you.
The franchisee is the third-party buyer who
purchases the brand rights from the
franchisor (the owner of the brand). The
franchisee pays an initial franchise fee to
the franchisor for the rights to use their
brand in addition to ongoing franchise fees
for marketing, royalties, and more.
There are several advantages of franchising
for the franchisee, including:
1. Business assistance
One of the benefits of franchising for the
franchisee is the business assistance they
receive from the franchisor.
Depending on the terms of the franchise
agreement and the structure of the
business, the franchisee might reqceive
essentially a turnkey business operation.
They may be provided with the brand, the
equipment, supplies, and the advertising
plan—essentially everything they need to
operate the business.
Other franchises may not provide
everything, but all franchises provide the
knowledge and wisdom of the franchisor.
Whether that knowledge is stored in a
phone number to reach the franchisor
directly, the franchisee has access to a deep
reservoir of business assistance to guide
them through the process of owning and
operating a business. This knowledge can
be essential to running a successful
business and makes it much easier than
starting a business from scratch.
2. Brand recognition
A big benefit that franchisees receive when
opening a franchise is brand recognition. If
you start a business from scratch, you
would have to build your brand and
customer base from the ground up, which
would take time.
Franchises, on the other hand, are already
well-known businesses with established
customer bases built in. So when you open
a franchise with this recognizable branding,
people will automatically know what your
business is, what you provide, and what
they can expect.
3. Lower failure rate
In general, franchises have a lower failure
rate than solo businesses. When a
franchisee buys into a franchise, they’re
joining a successful brand, as well as a
network that will offer them support and
advice, making it less likely they’ll go out of
business.
As well, franchises have already proven
their business concept, so you have
reassurance that the products or services
you’ll be offering are in demand.
4. Buying power
Another benefit of franchising is the sheer
size of the network. If you’re operating a
standalone business and need to order
products or supplies to make your products,
you’re paying more money per item
because your order is relatively small.
However, a network of franchises has the
opportunity to purchase goods at a deep
discount by buying in bulk. The parent
company can use the size of the network to
negotiate deals that every franchisee
benefits from. A lower cost of goods lowers
the overall operation costs of the franchise.
5. Profits
In general, franchises see higher profits
than independently established businesses.
Most franchises have recognizable brands
that bring customers in droves. This
popularity results in higher profits. Even
franchises that require a high initial
investment for the franchise fee see high
return on investment.
6. Lower risk
Starting a business is risky. This is true
whether a business owner is opening an
independent business or purchasing a
franchise. That being said, the risk is lower
when opening a franchise.
One of the reasons franchise owners face
lower risk than independent business
owners is the franchise network. Most
franchises are owned by established
corporations that have tested and proven
the business model of the franchise in
multiple markets.
This lower risk may also make it easier to
access loans, including the best SBA
franchise loans, to help you launch your
business.
7. Built-in customer base
One of the biggest struggles of any new
business is finding customers. Franchises,
on the other hand, come with instant brand
recognition and a loyal customer base. Even
if you’re opening the first branch of a
franchise in a small town, the likelihood is
that potential customers are already
familiar with the brand from exposure to TV
commercials or travel to other cities.
8. Be your own boss
One of the biggest benefits of owning a
business is being your own boss. When
starting a franchise business, you get to be
your own boss with the added benefit of
receiving support from the franchise’s
knowledge base.
Owning a business is hard work, but when
you’re your own boss, you get to create
your own schedule, have autonomy over
your career, and potentially work from
home.
A franchise gives you the benefit of being
your own boss without the risk of starting
your own independent business.
Disadvantages of franchising for the
franchisee
While there are many advantages of
franchising, it would be remiss to think
there aren’t also disadvantages. Let us
explain further.
1. Restricting regulations
While a franchise allows the franchisee to
be their own boss, they’re not entirely in
control of their business, nor can they make
decisions without taking into account the
opinion of the franchisor.
For most franchisees, the most frustrating
disadvantage that they face is that they
must follow the restrictions laid out in the
franchise agreement. The franchisor can
exert a degree of control over the majority
of the franchise business and decisions
made by the franchisee.
Depending on the franchise agreement, the
franchisor can control any of these aspects
of the business:
Business location
Hours of operation
Holidays
Pricing
Signage
Layout
Decor
Products
Advertising and marketing
Resale conditions
These restrictions are put into place to
maintain uniformity between the different
franchises and the overall brand, but they
can also be frustrating and feel limiting for
the franchisee.
2. Initial cost
While the initial investment of the franchise
fee buys a lot of benefits for the franchisee,
it can also be costly—especially if you’re
joining a very well-known and profitable
franchise. While this often translates to
larger profits, coming up with this initial
money can put a strain on any small
business owner.
Even if you opt for a low-cost franchise,
you’ll likely still have to front a few
thousand dollars. While this can be seen as
a disadvantage of franchises, it’s important
to weigh the opportunity against the initial
investment and find the right balance for
your business. And keep in mind, there are
also franchise financing options to help you
come up with this initial cost.
3. Ongoing investment
In addition to the initial investment you’ll
have to provide to start your franchise,
there are additional, ongoing costs that are
unique to franchises. Within the franchise
agreement, the ongoing costs of the
franchise should be enumerated. These
costs might include royalty fees, advertising
costs, and a charge for training services.
You’ll want to keep these ongoing fees in
mind when you’re deciding whether to start
a franchise.
4. Potential for conflict
While one of the benefits of owning a
franchise is the network of support you
receive, it also has the potential for conflict.
Any close business relationship, especially
when there’s an imbalance of power, comes
with a risk that the parties won’t get along.
While a franchise agreement states the
expectations of both the franchisee and
franchisor, the franchisee has minimal
power to enforce the franchise agreement
without a costly legal battle. Whether it’s
lack of support or simply a clash of
personalities, the closeness of the business
relationship between franchisor and
franchisee is rife for conflict. A franchisor
should screen all potential franchisees
before entering into business with them,
and as the franchisor, you should also use
this opportunity to get a feel for the
franchisor’s personality and management
style.
5. Lack of financial privacy
Another disadvantage of franchising is a
lack of privacy. The franchise agreement
will likely stipulate that the franchisor can
oversee the entire financial ecosystem of
the franchise. This lack of financial privacy
can be seen by franchisee as a disadvantage
of owning a franchise; however, it may be
less of an issue if you welcome financial
guidance.
Advantages of franchising for the
franchisor
The advantages and disadvantages of
franchising don’t solely apply to the
franchisee, of course. The franchisor should
also weigh the pros and cons before
deciding to enter into this business model.
First, let’s explore the benefits of
franchising that the franchisor can enjoy.
1. Access to capital
One of the biggest barriers to expansion for
small business is the money it costs to
expand. And while there are several
business loan options, they don’t always
pan out. Franchising your business will take
some time and money on your end, but it
also has the potential to make you a lot of
money in the form of franchise fees.
Expanding your business as a franchise
allows you to expand with little debt. The
business expands as capital becomes
available from franchisees instead of taking
on debt through loans. The franchisor also
shares minimal risk with the franchisee
because the franchisee puts their name on
the deed for the physical location of the
business and lowers the franchises overall
liability.
2. Efficient growth
Opening the first unit of a business is costly
and time consuming. Opening a second unit
can be almost as difficult. When that
burden is shared with another business
owner, it makes the process more efficient
and takes the onus off the initial business
owner.
When trying to grow your small business, Additionally, the franchisor is often further
starting a franchise can make opening insulated because the franchise is
multiple locations a much simpler process. incorporated as a new business entity,
leaving the original business owned by the
3. Minimal employee supervision
franchisor as a separate entity from the
One of the big stresses as a business owner franchise. A franchise lawyer can help to set
is hiring and managing employees. As a up the terms for this type of protection
franchisor, the only support that you have within the franchise agreement.
to provide to the franchisee is training and
The final word
business knowledge. In general, the
franchisor has no hand in the management, Like most other business decisions, starting
hiring, and firing of employees. or buying into a franchise has its pros and
cons. And not all franchises or franchise
This minimal employee supervision allows
relationships are created equally. It’s
the franchisor to focus on the growth of the
important to do research before choosing
business instead of day-to-day operations.
the franchise that’s right for you and to
Instead of worrying about whether an
understand all the advantages and
employee shows up for their shift or not,
disadvantages of franchising that you may
the franchisor is focused on the big picture
come across as either the franchisee or
for business success.
franchisor.
4. Increased brand awareness
How to create a successful franchise
One of the many benefits of franchising is marketing plan
increased brand awareness. The more
Focus on social media marketing
locations the brand has, the more people
who are aware of the brand. And the more Drive traffic with search engine
these customers come to know and love the optimization
brand, the more profitable and successful
Stay connected through email marketing
the brand can be. This increased brand
awareness of a multi-location franchise can Increase brand awareness with public
be highly beneficial to the franchisor and relations campaigns
their franchisees—a win-win.
Create a content marketing plan
5. Reduced risk
Use influencer marketing
One of the biggest benefits to the
Manage online reputation
franchisor in a franchise agreement is the
ability to expand without an increase in risk. Enable franchisees to execute local and
Because the franchisee takes on the debt personalized franchise marketing
and liability of opening a unit under the campaigns
name of the franchise, the franchisor gets
Franchise marketing examples to inspire
all the benefit of an additional location
your strategy
without taking on the risk themselves.
Creating an effective franchise marketing
strategy is an obstacle every franchise
business faces.
Whether you're the franchise owner of a
Quick Service Restaurant (QSR) franchise
like McDonald’s or a multi-location business
like the Hertz car rental dealership brand, or
have bought into the Gold’s
enterprise, you’ll know that streamlining
your franchise marketing efforts is a
challenging process.
There are two main types of franchise
marketing: operational and franchise
development marketing.
Operational franchise marketing aims to
acquire and retain customers. It also aims
to increase brand awareness
strengthen the organization’s reputation.
Franchise development marketing helps
reach out to prospective franchisees and
educate them about the business. The goal
is to project the franchisor as a credible
organization, attract more franchisees and
boost revenue.
The franchise marketing strategy can also
vary depending on the type of franchise
business model. A large global chain, like
KFC, would have strict brand guidelines
about brand colors and logo usage.
Yet, they would have to offer space for
regional variations in the marketing
strategy. For example, KFC stores in China
could run special campaigns around Chinese
New Year.
Similarly, American outlets can
promotions and giveaways during
Independence Day or Thanksgiving. In
contrast, an LA-based company that only
has Californian franchisees can create a
single franchise marketing strategy for all
outlets.
Franchise marketing is a multifaceted
activity. It includes PR campaigns, social
media marketing, newspaper adverts, and
reputation management.
Remember, these tactics cannot work in
Gym
isolation. They must be brought together as
cohesive franchise marketing strategies.
How to create a successful franchise
marketing plan
If you’re creating a franchise marketing
strategy from scratch or looking to revamp
your existing one, we’ve got you covered.
Here’s a list of eight franchise marketing
strategies to get you started.
and
1. Focus on social media marketing
A person holding up a phone and making a
video testimonial for social media.
Thanks for its growing popularity among
nearly everyone with an internet
connection, franchise owners need to
consider social media when it comes to
digital marketing channels.
Over half the active users on Facebook and
Instagram use the platforms to follow or
research brands and products. This makes
social media an effective part of a franchise
marketing plan because it allows franchise
owners to reach out to new and prospective
customers.
Many social media platforms offer digital
advertising options. You can run paid ads
offer and narrow the demographics on various
factors like franchise location, age, and
gender. You can also encourage the use of
brand hashtags to boost online visibility.
Social media helps you go
disseminating information. It allows local
franchises to have a two-way conversations
with consumers. You can respond to
feedback and queries and let customers
know that you value their opinion.
Social media is also a great addition to any
franchise marketing strategy that enables
businesses to show their personality and be
more authentic.
Popular brands like Taco Bell, Wendy’s, and
Chipotle often lever channels like Twitter to
engage with their customer base in a light-
hearted way as part of their franchise
marketing plan.
While they maintain brand consistency,
their franchise marketers engage with their
audience (and even competitors) through
threads and memes. These back-and-forth
interactions have historically brought a
smile to their consumers' faces and boosted
brand awareness.
When a franchise location opens, you
should create a structured social media plan
that combines organic and paid franchise
marketing strategies.
Examples of organic strategies include
posting regular content and
directly to comments. Paid strategies such
as YouTube or Meta ads can also be
effective.
Together, they help capture the digital
space and convert online followers into
customers.
2. Drive traffic with search
optimization
Franchise SEO locations and a mobile map
app.
beyond Search engine optimization (SEO) is a
valuable tool to increase the visibility of
your local business' website and drive
traffic.
As a local business, SEO is also a great
franchise marketing tool for people with
limited marketing dollars.
The ultimate goal of these franchise
marketing efforts is to help you generate
leads that convert to sales. Approximately
50% of shoppers use Google to discover or
find new products. So you want to make
sure you have strong SEO in place as part of
your franchise marketing strategy.
A franchise SEO strategy can help Google
Business Profile listings become top-rated
and rank higher on search engines.
This makes users more likely to choose your
website over other ones. It also improves
your credibility and helps increase your
brand identity.
Here are some good practices to improve
your search engine rankings while keeping
marketing spend to a minimum:
Publish relevant content — Google will
consider your content high-quality if it’s
updated, well-written, and unique. Make
replying
sure to include targeted keywords that your
users are likely to use.
Optimize your website for mobile use —
Almost 59% of global web traffic comes
from mobile devices. This makes it essential
for a multi-location business to have
mobile-friendly websites. By optimizing
engine your website for mobile use, you give users
the convenience of interacting with your
brand across devices. This added
accessibility helps improve customer
retention and drives sales.
Improve your domain authority — This is a
two pronged-strategy. First, you must
remove dead or irrelevant links from your
website. Second, you should create
authoritative content that other websites
link back to.
Quicken your website’s loading speed — If
your website takes too long to load, your
potential customers won't stick around.
Even worse, they might buy the product or
service from your competitors. Multi-
location businesses must test their websites
often to make sure they’re loading quickly.
3. Stay connected through email marketing
Three people creating an email marketing
campaign.
You can include email as another one of
your franchise marketing channels to
deepen your relationships with existing
customers and reach out to prospective
ones. Email marketing is an effective way to
educate your target audience about your
offerings
In fact, 87% of marketers use emails to
distribute content organically. Moreover,
using email as part of a franchise marketing
strategy allows you to personalize brand-
consistent messaging, which helps make
your audience feel more connected to it.
Organizations use email marketing as one of
the top metrics to determine how
successful a piece of content is. 86% of
marketers use open and click rates to
measure content performance. This is a
higher percentage than that of social media
analytics of website traffic.
To create a successful email plan, you’ll
need to follow these steps:
Pick an email service provider that will help
you create, organize and send out emails. It
should provide you with all relevant
performance analytics.
Identify your target audience for the email
marketing campaign. Try to be as specific as
possible and narrow down on their personal
traits, shopping habits, etc.
Build a list of subscribers. You can offer
discounts in exchange for an email address
or place an opt-in form on your website.
Create engaging and visually-appealing
emails that follow brand guidelines and
send them to your audience. Don’t forget to
track how the emails perform and keep
working to improve your open and click
rates.
4. Increase brand awareness with public
relations campaigns
Person using a megaphone to reach four
different types of people.
A franchise business can use a PR strategy
to gain exposure and win its customers’
trust. PR campaigns show long-term results.
They strengthen brand identity over time
and use influential figures or themes to
promote company offerings.
At a broader brand level, public relations as
part of a franchise marketing strategy
benefits the franchisor and franchisee by
improving national brand identity while
increasing local marketing awareness for
individual outlets.
To create a successful PR strategy, you must
start by identifying your goals. Depending
on your marketing budget, they could be to
create hype around a new launch or
improve community relationships.
Next, you can research the different PR
channels available to figure out the right
one for you. Popular online marketing
channels include press releases, guest
blogging, and influencer collaborations;
traditional marketing channels could
include supporting local events, sponsoring
local businesses, and leveraging direct mail.
No matter which franchise marketing
strategy you’re using, brand consistency is
crucial. All your franchise marketing efforts
must present unified brand messaging. This
lets consumers know they can expect the
same experience across franchise locations.
That said, individual franchisees should be
able to contribute to the franchisor's
marketing strategies, too.
Even if people aren't franchise marketers by
trade, it could be awesome to create
communication channels to help
franchisees share local marketing campaign
ideas.
This includes them in the decision-making
process and encourages innovation and
fresh thinking. It also makes franchisees less
likely to deviate from corporate marketing
guidelines.
5. Create a content marketing plan
A laptop surrounded by different forms of
content marketing materials like images,
video, messages, and mail.
Before the television and the internet,
brands around the world used content as an
offline marketing tool! Over the years, it has
been largely adapted for online marketing
channels.
Content marketing is the process of creating
digital content like blog articles, videos,
podcasts, and photos that don’t directly
advertise a product but help educate and
create interest in the product or service
among the target market.
It's a highly successful digital marketing
strategy where 67% of online marketers
believe that it helps generate more leads
and demand while 83% marketers attribute
better brand awareness to content
strategies.
This means franchises should conduct
thorough market research to define their
target audience, find relevant topics and
keywords to talk about, and find a niche
that isn’t oversaturated saturated with the
same types of content.
Based on these factors, you can get your
target audience excited about your brand
by developing marketing materials like
behind-the-scenes visuals, educational
blogs that cover underrated or overlooked
areas of your niche or industry, helpful
eBooks, informative webinars, in-depth
white papers, and infographics to share on
your company website.
6. Use influencer marketing
A person creating digital content as part of
an influencer marketing campaign.
Influencers have become a marketing tool
to command the attention of millions of
people, young and old, around the world.
An established brand would likely have easy
access to highly influential social media
personalities who can popularize your
brand among your target audience.
Influencer marketing can not only help you
improve brand awareness, but it can also
take your products or services to new
customers who might otherwise have not
known about you.
All you have to do is to identify influencers
who fit your brand values and ideals and
will be able to represent your brand with
finesse.
One popular example of what this can look
like is, you send your brand products to
influencers for free and they use and
market your product on their social media
channels in exchange for videos and photos.
And of course, you'll want to make sure the
influencers you work with follow your brand
guidelines and don't become the bulk of
your marketing expenses.
7. Manage online reputation
Three people each carrying a heart, star,
and thumbs up toward an open franchise
location.
Nine out of ten customers read online
reviews before buying a product. This
means that a brand’s online reputation
plays a massive role in determining
potential customers’ purchase decisions.
To make sure that your franchise locations'
brand image is (and remains) spotless, you
need to monitor and manage your online
and social media presence.
But not ever franchise necessarily has a
marketing team that's entirely dedicated to
reputation management.
Now more than ever, online marketing is
just as important — if not more important
— than offline marketing.
As a franchise owner, here are a few things
you should do for all your business
locations:
Respond to all reviews, negative and
positive
Encourage customers to leave you a review
online
Ensure that all your franchise locations are
listed on major business listing websites like
Yelp and Google Business Profile listings
Work on improving customer relationships
Respond to reviews, complaints, and
testimonials on social media platforms
Use customer feedback to improve
operations and avoid negative reviews.
8. Enable franchisees to execute local and
personalized franchise marketing
campaigns
Two shoppers being pulled with a magnet
toward a shop.
While it is important to maintain brand
consistency and marketing uniformity
across your brand, it is also crucial to
localize and personalize marketing
campaigns so as to appeal to local target
audiences in all your locations.
Within the franchise model, a parent
company with multiple locations can do this
by educating prospective franchisees on
how to create a successful franchise
marketing plan and equipping them with
the tools and know-how needed to execute
such campaigns successfully.
Franchisees could use local data to create
personalized outreach campaigns using
emails or direct calls. They can also create
locally relevant franchise marketing
material to use in digital marketing efforts.
As part of your franchise marketing plan,
you could utilize local cultural themes,
social issues, or even language that's native
to franchise locations to make the ad
content more appealing and easily
consumable for local audiences.
For example, global sporting giant Nike
often creates local franchise marketing
campaigns targeting specific locations.
Its ‘Nothing Beats a Londoner’ local
marketing campaign is a great illustration of
how franchise marketers tailored content
for a specific locale.
Franchise marketing examples to inspire
your strategy
Sometimes it can be challenging to come up
with strategies in a silo. There’s no harm in
looking for inspiration to improve your
franchise marketing strategy.
There are thousands of franchise businesses
in the market. You can spend some time
researching their strategies and identifying
what works best.
https://www.highervisibility.com/
industries/franchise/learn/how-to-market-
your-franchise-business/
5 Principles of Franchising That Never
Change
Since the beginning of franchising, there
have been principles that ensure that a
franchise system grows and prospers. These
principles of franchising have never
changed. They represent a foundation in
which every successful franchise is built. It’s
also believed that those who understand
and adopt these principles of franchising
will undoubtedly find success..
Franchisors Should Disclose All Information
Upfront
First up on our list of principles of
franchising that never change is franchisors
disclosing information to potential
franchisees upfront. Honesty though, this is
not only essential for having a long-lasting
relationship with your franchisee, but it also
plays a significant role in your franchise’s
overall success. It helps avoid creating false
expectations, such as saying that finding
success is easier than it actually is, and
being honest is a building block in your
franchisees trusting and confiding in you.
Potential franchisees should also have
access to the company’s franchise
disclosure document (FDD). This document
contains information about the franchise,
ownership, brand, operations, and past
legal trouble. All of which equip franchisees
for a career with your franchise.
Franchises Should Make Money
When it comes to building a new franchise,
it must be structured so that the business
can be profitable. After all, the point of
owning a business is to make money. In
addition to offering proper training, a
franchisor should be responsible for
ensuring their franchisee has all the tools
they need to succeed. These tools can come
in many forms, including informing them
about all of the expenses they’re required
to pay and keeping said expenses
reasonable. A franchisor should not be the
reason why their franchisee falls flat upon
launch.
Franchisors Must Offer Proper Training and
Support
To be successful, you must first be set up
for success. One of the reasons
entrepreneurs prefer franchising over
starting their own business from scratch is
the amount of training and support they
receive from their franchisor. Having this
comprehensive training is a must to prepare
them for running their new franchise
business and boost their confidence.
Some franchisors may not be able to
dedicate the time to provide you with
proper training. This can be because of low
capital or not enough resources. If this is
the case, it’s best to hold off on the
onboarding process or investing at all until
they can.
Focus on the Long-Term Gain, Not Short-
Term Benefits
Franchises aren’t for entrepreneurs looking
to make some quick revenue. You’ve got to
be in it for the long haul. This franchising
principle warns that although franchising
often comes with a proven business model
and tons of brand recognition, it doesn’t
guarantee immediate success. You need to
ensure that you have the capital to keep
your franchise afloat as you wait for it to
start making money.
It’s also important to remember that not
every franchisee reaches the same level of
success. Some franchisees find success
later, whereas others may not find success
at all. The reasons for the failure, of course,
vary. In some cases, it’s the franchisor’s
failings, but in others, it’s the individual
franchisee’s missteps. No matter the
struggles, be prepared for the ride.
Evaluate Your Franchise Performance
Another one of the principles of franchising
is to evaluate your franchise. The ability to
self-reflect and assess is a vital part of
running a healthy and successful business.
Be sure to schedule a time to review your
business’ overall performance, including
financially. Employing this practice ensures
that you’ll always have the necessary
information to make an important strategic
decision and can bring it to your
franchisor’s attention.