Franchising’s Infrastructural Backbone
The second key to the franchise value proposition is the infrastructural backbone. The things that the franchisor does for the franchisee every day to add value and to allow the franchisee to establish and maintain a competitive advantage in the market place. A few examples are as follows –
Purchasing Power – A well established franchisor will work hard to provide purchasing power advantages to its franchisees. Included could be lower costs in the areas of material, advertising, equipment, signage, leasing, vehicles, software, IT, accounting and many other areas. These preferential pricing advantages allow the franchisee greater flexibility from a pricing or profitability point of view.
Marketing Efficiency- Franchise systems achieve marketing advantages in several ways. First, most franchise systems will establish national pricing programs with advertising organizations such as ValPak. However, the advantage does not end there. Most franchisors also have an Ad Fund. This is a central fund that creates advertising materials and programs for the franchisees to use. There programs are professionally created and available to the franchisee at reproduction cost. Finally, all franchise systems have the ability to create advertising Coops in a local DMA. These Coops are critical in reaching marketing efficiency and avoiding the free rider effect. With marketing efficiency within a given DMA, the power of the entire marketing program increases dramatically.
Technology – Today, businesses run on technology and the internet. If a small business does not have comprehensive customer relationship management software both in place and functional, it is working at a significant disadvantage. Same can be said with the creation of website that both get the message out and can be found when someone searches on the targeted key words. Making these things happen is both expensive and time consuming. Through the development of multiple locations, the cost/benefit ratio improves and it then makes sense to develop comprehensive systems.
Scheduling – Similar to the Technology discussion above, today many franchise systems have web based scheduling systems. In service based franchises, they also have call centers that can answer the phone if you are not available. This call center can schedule tentative appointments for you on the web based scheduling system. If you have employees servicing customers, the web based management system will allow you to track the progress of your employees throughout the day. As an owner, you can track the business from anywhere there is an internet connection. Pretty amazing.
In many ways, the infrastructural backbone provides the same type of advantages that most chain based businesses have over most mom and pop businesses. These systems allow you to run your business more effectively, at a lower cost and with greater control. Most importantly, these advantages remain with the franchisee for the length of the relationship, which takes us to our next topic, Fellow Franchises.