What are the strengths and weaknesses of a franchise business ?

Faced with inventive competition and a market often close to saturation, an entrepreneur who opts for the franchising business chooses the pace of rapid development through the network system. This activity has several advantages, but also many constraints.

The benefits of creating a franchise

A franchise is based on a strong idea: that of sharing success. And indeed, the numbers prove it: the rate of bankruptcy is noticeably lower in franchise than in solo. Where the average is 50% of cessation of activity in the traditional trade in the first 5 years, it is more than 20% on average for duty-free businesses … How can one explain that? In fact, the durability of franchised companies is mainly due to the very model of the franchise, which involves a tested and turnkey business, permanent support, the exploitation of a recognized brand and, of course, group dynamics. carried by the spirit of network. The franchiser’s status is anchored on a win-win partnership between two autonomous entities in legal and financial terms. The franchisor collaborates with a network of franchisees in many areas of activity, including in the trade such as clothing, body care, food and services like the interim, car repair , catering, real estate. Through franchising, the franchisor benefits from the mix of business and financial opportunities. Indeed, a franchisor is prioritized by the financing bodies for the development of its network of franchisees. The visibility of the brand, present in many outlets, allows gaining market share. The distribution channel is controlled thanks to the organizational autonomy of the franchisees.

The drawbacks of franchise creation

The disadvantages of a franchise creation largely derive from the advantages of the franchise listed above. They are financial and strategic. In terms of finances, the investment is very important. Indeed, the franchisor has to bear all the costs related to the implementation of the project, the launch of the tasks, the stage of maturity which includes the implementation of the project, the evaluation in the field, the development phase, assistance and support, research and innovation. In strategic matters, the franchisor’s marketing is geared towards differentiation to stand out from the competition. Most of the territory is limited to the franchisor. The franchisor is entirely responsible for the success or decline of his brand. The implementation and management of a network of franchisees must be subject to regular and rigorous training and control, to respect the image of the brand and build customer loyalty.

Franchise management and performance monitoring

Franchisees, know it, until very recently, it was as difficult as it was complicated for a franchisor to set up a performance control system (encrypted) of its different franchisees. However, the quality of the support provided to each franchisee essentially depends on the overall view provided by the figures of its results and performances. This control is now possible thanks to an electronic data processing mainly covering sales (quantified results of cash or billing systems), expenses (quantified results of the accounting), the difference between the two (operation which allows establish a major document at this level: the monthly operating account of the franchisee).

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