Buying A franchise – What are you REALLY buying?

Ask most of those who are interested in buying a franchise what they are really buying and you will get a variety of answers.

Some will say they are considering a franchise because It is “proven” –

As we show in the Franchise Secret – that is just an assumption. Indeed for first time buyers of a franchise the facts do not support much of the industry rhetoric – indeed evidence we present here shows it is on average a less safe way to start out in business. Yes you heard me right. Scientific investigation says a franchise is not safer for a new starter. We will deal with that elsewhere.

Some will say they are buying “training”.

Training is clearly not enough.

Sure many people come to franchising because of lack of experience , so it is training and support they are buying. But all your competitors in that market already have the training, so by itself it is not enough.

A lot of the franchisors will say “in business for yourself, not by yourself” – It sounds good at first sight but there is a good case for the reverse of that!! – you are in business by yourself, and you cannot expect the franchise to bail you out of a difficult situation. You are certainly in business “for the franchise”

So what do we think you SHOULD consider the reason for buying a franchise.
And there is ONE very compelling reason. All of the others boil down to this.

The answer is simple and far reaching. It is both simple and profound – and the benchmark to measure every franchise.

The answer is the ONLY reason to buy a franchise is that you are buying competitive advantage against every independent in your market.

When the customer asks “why should I do business with you instead of anyone else” – the answer should be bound up in what the franchise have given you: which compels the customer to do business with you.

Nothing directly to do with training or proof – not that they are not important – but all to do with the deal that compels customers to deal with you.

The point is your “exclusive territory” is not exclusive to independents – it is there to keep you in. It does not keep anyone out.

You also compete at a disadvantage o cost – that you pay to the franchisor – and flexibiliity geographically. So the ADVANTAGE must be big to overcome the costs and limitations.

So the franchise must offer you a competitive advantage over everyone else you compete with.

Many ways – we will look at that as part of the Franchise Balance.

But take for example supply chain – in the case of some of the retail franchised chains – the economy of scale means that they offer ebetter deals on logistics and price to their franchisees, than the franchisees can get elsewhere.

And in the case of mcdonalds? The competitive advantage is that many people (goodness knows why) would prefer to eat at mcdonalds than anywhere else. The day that stops – and it was rocky for a while at the time of the healthy eating craze – is the day mcdonalds loses competitive advantage.

What is the biggest proof you can have that this is true?

One of the tests we consider in the Franchise Balance is when INDEPENDENTS want to join the franchise!! – and proof it has happened – in the case of the better retail franchises – it very often does.

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