Franchising and the Power of Branding

All successful franchises have at least the following two things in common – a proven product or service and a well recognized brand.

Many successful, independent small businesses also have a proven product or service. After all, that’s why they’re successful in the first place.

But very few have a recognized brand. There are, of course, exceptions to this. Most are what could be characterized as local or regional brands. This was particularly true in years past when there were an abundance of local bakeries, dairies, breweries and confectioners.

They catered to local tastes and served a limited geography. But, in their own small spheres of influence, they were recognized brands.

Some of those brands continue to exist in limited geographies today like Dixie Beer in New Orleans. Others, like Marquetand’s Candy of Philadelphia, slowly withered and died despite serving the best chocolates and ice cream in the Delaware Valley.

Brands become recognized on a regional or national basis only through wide geographic availability and frequent exposure to their targeted audience. However, few independently owned small businesses can afford the multiple outlets necessary for national (or even regional) distribution or the high levels of advertising and marketing support required to establish and maintain a brand.

But that’s not the case with franchised businesses. Franchising is both a financing and a distribution strategy. Franchising enables the owner of a successful business, the franchisor, to expand his distribution while others pay to accomplish it.

The buyer or franchisee pays the franchisor a fee for the use of his brand, the featured product or service and all of the intellectual property that make that business successful.

As a result, franchised businesses are able to grow many times faster than multiple unit independent businesses, which are constantly in search of funds for expansion and for motivated managers.

The franchisor’s original business location might be in Omaha, but when he or she franchises their prototype business, buyers are free and encouraged to duplicate that success in locations across the country. On the other hand, independent businesses looking to expand must, of necessity, stay close to home to monitor and manage their multiple units and compete for scarce local funding.

The pooling of advertising funds from dozens, often hundreds, even thousands of franchisees can support multi-million dollar advertising campaigns that further grow the brand, continue to build consumer traffic and attract additional franchisees.

With established franchises the brand precedes new franchisees into the market. Since the brand has achieved broad success in other markets people are already aware of it and what to expect during their purchasing experience. Opening a Gold’s Gym or a Dairy Queen franchise is dramatically different from opening or expanding an independent gym or frozen custard business that has little or no brand equity.

An established brand quickly telegraphs who you are, what you sell and how you conduct your business. A successful brand almost guarantees consumer acceptance before the fact. Think Midas, 7-Eleven and Hilton!

Franchised brands for superior products and services quickly lead to market expansion and category domination. The large number of units in mature franchise systems affords huge savings through bulk purchasing of products and supplies. And their tested and proven systems result in significant operational efficiencies.

To sum up, franchising leverages the power of an established brand to facilitate expansion and rapid acceptance, dominate unbranded competitors and, ultimately, increase operational and purchasing economies.

Thinking of expanding?

Think franchising. And the power of the brand.