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The Benefits of the Franchise Model

The Benefits of the Franchise Model

As with any business opportunity, there is no guarantee of success, and there are trade-offs to be made. In some ways, franchising is like paying condo fees instead of owning a home. In a condo association, monthly fees are pooled for common external maintenance (mowing, snow removal, roof repairs, etc.) – a trade-off many are willing to make to free themselves to concentrate on their “core business” of living their lives (or business) within the walls of their condo (or franchise) unit. And unlike renters, who can be evicted (or corporate employees who can be fired or “downsized”) franchisees have some power of their own: a franchisor cannot “fire” a franchisee who is operating in compliance with the franchise agreement.

Follow the system” is a mantra in franchising and critical to a franchisee’s success. Franchisees buy into the franchisor’s operating system believing that if they follow it to the letter they will succeed and be profitable. Smart franchisors are always open to suggestions from their franchisees for change (as well as local or regional variations), but any franchisee departing from the “system” without franchisor approval risks violating the terms of the franchise agreement, which can result in revocation of the franchisee’s right to do business under the franchisor’s name. Franchisees also must agree to keep the franchisor’s proprietary system and trade secrets confidential, as well as sign some type of non-compete agreement.

Not everyone is cut out for franchising. Some need total independence to succeed or fail on their own, while others prefer the tradeoffs found in working for a larger organization. For the franchise partnership to succeed, the buyer must be comfortable not only with the franchise model, but also with the culture, values, and goals of the franchisor — and vice versa.

In this light, many view franchising as a commitment much like a marriage. A good match between franchisor and franchisee, sharing mutual goals over the long term, is essential to the success of each franchise unit, and thus the brand as a whole — an essential factor that must be considered seriously by both parties before any contract is signed.

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