Franchise or Independent? What does a franchise offer over an independent business start-up?
You have decided to enter the exciting world of stone, tile and grout restoration and care. You correctly perceive a need in the market that grows daily. Your next and likely most important decision is whether to establish yourself as an independent or part of a franchise organization. Benefits exist for both directions. Ultimately a case can be built for either path. However, if you are to survive your first two years in business, this may be the most important decision you make.
95% of franchise businesses are still in business a year after they open compared to only 5% of independent businesses. Why?
1. Franchisees can spend more time selling and closing deals
Franchise organizations have already worked out and optimized many of the routine business practices that are required to run an efficient operation. As the market ruthlessly penalizes inefficiency this is a significant benefit. These are often the unthought-of of details ranging from material selection, equipment maintenance, how best to purchase or lease you next vehicle, employment policies, how to protect against customers who get great service but decide not to pay. All of these issues can chew up valuable time that could be spent doing the only two activities that make money selling and doing the work. (Read E-Myth)
This means that a franchise can spend more time focusing on the key activities versus an independent competitor. More to the point the franchise is better able to compete making more calls and closing more sales.
2. Higher productivity
Mother Nature has no quality assurance program. A stone may look like something you have worked on before but is subtly different and does not respond to the recipe you were taught. For many new operators this can translate into huge costs ranging from extra unplanned for time, delays in starting next projects, or the worst possibility the cost to replace the stone or floor, not to mention the damage to the business name. Franchise operations rarely encounter such losses. Why you ask?
a. They have a strong technical support team in place that have been there, and solved such problems in the past.
b. They have a breadth of experience as a result of having numerous networked locations such that it is unlikely you are the first to encounter this problem.
c. When a new problem arises the franchise can dispatch its team of experts to assist in overcoming the problem and then alert the full network of the problem and solution.
Their technical department is constantly reviewing the latest offerings, and given the fact they influence the purchase decisions of numerous franchise operations they are often the first to receive samples or news of a new product or piece of equipment. As such, in many cases they do not have to even develop the next great thing, as other companies are beating down their door to introduce their ideas. As such, the franchisee can consistently stay in front of the market introducing the latest technique and offerings.
3. Response to competitive threat BEFORE it is encountered
Ever see a documentary of fish where the entire school of fish turns away from a predator? Ever wonder how the fish on the far side of the school that did not see the shark knew to turn away? This is called swarm intelligence. The fact is that the school as a whole has greater intelligence and ability to survive than the single fish. Effectively instead of having 2 eyes it has thousands watching for attack. Franchises operate in the same fashion. A new tactic employed by a competitor in Boston can be relayed to the entire network across the world within minutes. The net result is each office begins to morph to address the new threat long before it ever arrives in their market. Who is better positioned to survive a change in the market – the franchise or the independent.
4. The quality myth
Most hands-on operators enter a business with the belief that as long as I deliver a quality service or product the market will love me. Unfortunately, that is not the case. The offering includes everything. The quality of the experience to find the client, schedule their estimate, schedule their job, the level of comfort they have when you or your team pull in the driveway, enter the house, unload your equipment and finally do the job, and then the follow-up afterwards. Each is a separate element and process. Any level of dissatisfaction created along the way damages the entire offering, and ability to wow the client.
5. Marketing
We are fond of stating that the most gifted of craftsman will starve if his phone does not ring.
Communicating a specialty service to a niche market of stone owners is not for the faint heated. Most marketing techniques do not work. Yet some do. You can either spend a ton of money trying to figure out what works or you can work with the franchise with a marketing department charged with figuring out not just what works, but how to get the most of your marketing funds.
Internet is here and growing. A franchise has the muscle, resources and ability to outperform the independent online in all categories:
· Quality of site design
· Breadth of content enabling it to score well on relevance ratings
· Ability to refresh on a regular basis enabling it to score well on age of information
· Ability to create tools making the site of interest to more users on a regular basis
As more and more business goes to the Internet, the portion that is serviced by the independent service provider is shrinking.
Don’t be fooled – brands matter. As markets mature, they favor recognized brands that communicate quality and service. As the market matures it consolidates and brands begin to emerge.
6. National Account Coordination
Large accounts do not want to deal with 100 independent service providers, each with different procedures, quality levels and response rates. They want to call one number and know that anywhere in the country, the continent, or the world, the person on the other line can deliver and manage the service they need in a problem free manner. Effectively unless aligned with a national group you are likely to see more and more work moving to the national franchise firms.
7. Organization Development
Everyone brings their skills and understanding to their new venture. Each new business requires operations, marketing, sales, human resources, safety, purchasing and receiving skills, yet most of us have experience in one or two areas only. This means that there are risks for which we are not naturally aware. Further one’s business will need to overcome or arrange to secure each of these skills in order to grow. Franchisee’s have the benefit of having a business coach and mentor to help define their blind spots, and arrange to secure the skills needed to continue to grow.
8. Training & Development
Do not confuse education with efficient training. Like anything else one must understand the motivations of the educator. A franchise makes its money as a percentage of sales of each office. This means they are motivated to see each office sell more, and each craftsman to become more productive effectively expanding their capacity. However, most training provided by a vendor is designed to help you BUY more of their material. Consider how many hones it takes to restore a stone – one or many? Depending on who conducted your training you may have two very different and expensive answers.
A franchise can expect to get periodic alerts regarding updates in processes, or equipment, or warnings of drops in quality of supply of certain materials and how to address them. The independent businessperson must rely on his contacts or friends or experience to get him through.
So what does the independent businessperson have? Freedom. No one is pushing him to do more, to reach the next level or to change how he approaches his market.
Starting a business is a challenging task in and of itself. A franchise has a significant set of advantages dramatically increasing his chance of success, and ultimately his earnings and the value of his business.