The franchise business model is all about growth. Using a franchise system, franchisors oversee operations across multiple locations. Products and services are standardized to provide the same experience across all stores or restaurants, leveraging customers’ preference for the familiar to achieve business success.
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Multi-unit franchising is an organizational model in which a single franchisee will manage multiple locations. This is typically done either by executing a separate contract for each outlet or by executing a single contract that requires the franchisee to open a number of outlets in a particular area. In either case, each individual manages multiple locations, thus spurring franchise growth to new levels.
This strategy is also popular because it allows franchisors to work with a smaller number of franchisees while still achieving significant growth. Studies have shown that franchisors often prefer multi-unit franchising because they feel that it opens them to a lower degree of risk. This allows the franchisor to work more extensively with those who have proven successful.
Inverted Pyramid Management
The inverted pyramid structure works well with franchise systems because it allows upper management to bear a greater weight while providing a strong foundation. All the while, franchisees are receiving their assistance at the top of the structure. Franchisor responsibilities include not only recruiting new franchisees, but also supporting them. The inverted pyramid provides for this by tasking executives with taking on the majority of the responsibility for the franchise organization. Franchisors are on top of them, and franchisees enjoy the lighter, more comfortable position at the top.
This management structure will help create a healthy and desirable environment for the franchisee, making the organization more enticing for new franchise owners who are interested in joining. A healthy structure facilitates faster and more stable growth.
Individual Location Franchising
Individual location franchising is a more successful model in areas where you need a franchisee with extensive local knowledge. If you want to place a successful franchise in a smaller town, individual location franchising is a smart option. This allows the franchisor to leverage a more in-depth knowledge of the locale while enjoying the added focus and attention that an individual can give to one sole project. This is a smart growth strategy for smaller locales.
Master franchising utilizes a third party between the franchisor and franchisee. Known as the master franchisee, this entity provides services and support to franchisees in a particular area. The master franchisee can be a person or company. In either case, this entity puts up a significant sum for the right to recruit franchisees and open locations in a particular territory. The master franchisee also handles royalty management in that area and takes the majority of royalties.
There are several different approaches to franchise management and growth, with no one-size-fits-all solution. Evaluate the area where you want to see growth, and leverage a smart system that will keep everyone connected and help you build strong, stable businesses in that area. Identifying the right approach to franchise development will help you cater to customers in your targeted area.