Expansion through Franchising

If any organization is serious about building a substantial business they should benchmark their progress against global industry peers not just on local competition. Franchising offers the opportunity to build truly national and global businesses on a scale that non-franchised competition just cannot match. Many of the world’s most successful companies such as Coca Cola, Shell, Toyota, BP, Ford, Pepsi, General Motors and of course KFC and McDonald’s have built domestic and global brands using franchising as a management and marketing tool far outstripping the enterprise value of their non-franchised counterparts.

In a franchised business, the owner operator is focused at the customer end of the business and interested in the lifetime value of the customer not just a one-off transaction as is often the case with paid employees. Another great benefit experienced by franchised networks is the micro-management of overheads and staff that creates operating efficiencies far better than many company-owned competitors.

This gives franchised businesses the edge over competitors who are still operating traditional non-franchised business models. ‘Subway sandwiches’ is the global leader in the sandwich business that was built on the back of a full business-format franchise program. From its base in America it has built a global business with over 16,000 stores built on a business model developed by its founder. Store numbers are expected to exceed that of McDonald’s within 2 years.

Gloria Jeans Coffees used franchising to develop their domestic business in Australia and are now approaching the 400 stores in Australia outstripping the growth of International giant Starbucks who do not franchise. Gloria Jeans has been so successful in its home market it is reaching market saturation and is almost at the maximum stores that the market can sustain. Gloria Jeans has leveraged the national network to create beachhead stores in over 20 countries and they expect that there will soon be substantially more of their coffee shops overseas than in their home market.

UK sandwich and coffee operator Pret has developed its London based business model as both a company-owned and a franchise structure to reward key staff and facilitate expansion into the US. It now feeds hungry New York residents from a multi-store base which it plans to expand across America. In tiny domestic markets like Australia which represents less than 2% of the world’s economy, the ANZ Bank used franchising to develop a mortgage broking network that now settles Billions of dollars in new loans each year through a network of ANZ branded and franchised mortgage brokers.

A further example is the Boost Juice network which had reached saturation with maximum store numbers in a county of just 20 million people. It had a choice of managing a maturing business simply maintaining static store numbers and sales of around $100 Million in one country or franchising overseas for growth. Boost Juice Bars can now be found in Indonesia, Singapore, Malaysia, Thailand, Hong Kong, Macau, Kuwait, Chile, Brazil, South Africa, the UK, Estonia and Portugal with more countries coming on-line as a result of a well developed and executed International franchise program.

Expansion through franchising is not just confined to the food service business. Many retailers from the body care retailer Body Shop, hairdresser Toni & Guy, auto service network Midas and child development franchise Helen O’Grady’s Children’s Drama Academy are just a few of the hundreds of retail and service businesses who now have huge domestic as well as multi-country global networks. Banks and other financial service businesses are now franchising their expertise and brand to grow better and more profitable businesses and even medical businesses are moving to expand their network through franchising.

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