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Brian Scudamore, Business Expert Columnist
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Brian Scudamore is the Founder and CEO of Vancouver-based 1-800-GOT-JUNK?, a hyper-growth brand dubbed one of the fastest growing companies in North America. 1-800-GOT-JUNK? Currently has more than 300 franchises across North America and Australia. Brian’s leadership is widely recognized by the media and business community.
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To franchise or not to franchise - that’s the question as a growing company considers how to expand
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Hi Brian,
I am the Owner of FROGBOX, a Vancouver-based sustainable moving supply company. My questions revolve around how to expand. We receive requests to franchise on a near-weekly basis, but have not decided if we want to grow through corporate locations or franchises. If you had it to do over again, would you still choose to franchise instead of opening corporate locations? Do you believe it is a viable option to grow using both franchises and corporate-owned stores? In order to grow quickly and be first in market, does franchising make the most sense?
Doug Burgoyne
http://www.frogbox.com
Dear Doug,
Franchise vs. corporate? Should I franchise? How do I franchise? These are some of the most common questions I am asked as an entrepreneur. My answer is that, if I had to start my business over again would I still choose franchising over corporate locations - yes, I would.
But that's in my business. Franchising is definitely not for everyone. In fact, in the early days of the Rubbish Boys (we became 1-800-GOT-JUNK? when we franchised) everybody I spoke to about franchising told me it would not work for my business. I felt otherwise. So, I worked very hard to ensure I had a solid franchise model with strong, scalable systems and the right people to develop and execute those systems. I took a great risk, and proved the naysayers wrong.
Keep in mind the many challenges and rewards of franchising. Here is my list of key considerations:
- Franchising requires a proven business model. This takes time and effort to develop (and patience). The final product is what will attract franchisee candidates. Many entrepreneurs rush into this process, which can lead to failure.
- Get the right people on board, not just corporate people. Be selective in the awarding of franchises. Some candidates may have pockets lined with gold, tempting when you want to grow your business and have a willing buyer. But remember, they represent your brand and should match the quality standards you have set for a franchisee.
- Realize that running a business is vastly different than running a franchise. When I took this leap back in 1999, it was a steep learning curve. Make preparation for this transition part of your due diligence.
- Building a franchise system is expensive. Yes, you will be funding the growth with franchise sales; however, the investment in creating and testing the systems, legal considerations, marketing to potential franchisee candidates, and all the support you will offer them, will be costly. It will take some time before your franchisees generate financial revenue.
- Franchisee satisfaction is crucial. Don't go down the franchising road without developing a method to measure the satisfaction of all your people. This will enable you to respond with informed and efficient actions when needed
It is advisable to have one or two corporate locations. These provide training ground for new franchisees; are great testing markets for new services or products; and are a smart way to expand into new countries and their business environments. In addition, franchisers can easily understand the operational issues franchisees face when they experience the same at the corporate location.
Corporate locations are also a source of income. However, any more than a couple of corporate locations in a franchise system can become a tax on the company. There are often staffing issues, as well as an "us vs. them" mentality that can crop up when there are a number of corporate locations in a franchise system.
1-800-GOT-JUNK? has had as many as six corporate locations in a franchise system of close to 300. Today we have just one. Having never gone the corporate-only route, I can't advise what is best for Frogbox, but remember that franchising is a commitment that requires hard work and the proper investment of people and time. I implemented trial-and-error on many systems before introducing the franchise model. I suggest you do the same. Above all, set your franchisees up for success.
Good luck!
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Read other articles by
Brian Scudamore:
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Read other columnist articles from the "Focus on Young Entrepreneurs" issue:
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Read other feature articles from the "Focus on Young Entrepreneurs" issue:
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Small Business Tip
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Don’t Cut Your Marketing Budget in a Recession
Perhaps the most widely ignored recession survival "rule," is to not cut back on
marketing efforts. A McGraw Hill study done during the early 1980s recession divided
firms into those that continued to spend on advertising versus those that cut back.
Researchers found companies that continued to spend doubled their sales and profits.
Those that cut back lost about 20 percent of sales and profits. The most dramatic
gains came in the first two years of the recovery when businesses that had continued
to spend enjoyed sales and profit growth of 273 percent. Those non-spenders, they
had 20 percent growth in sales and profit after five years compared to 1980.
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