A very common way for an concept to grow into a consumer service chain is to franchise the operations (see pages 75-76). This published interview with the publisher of UnhappyFranchisee.com illustrates in some detail, how taking on a franchise is not always a sound nor successful investment. It also identifies 13 potential mistakes a franchisee might make, and suggest how these can be avoided.
One of the big paradoxes in this business model, is that franchisees want to be their own boss, but the franchisor will always wish to have a high degree of control over the operation. Another paradox is that the franchisee chooses to sign a franchise agreement rather than set up their own operation in order to reduce risk, when the likelihood of failure is about the same.
But it is not all plain sailing for franchisors either, as we found out when researching the Domino’s Pizza UK Operations Insight (pages 25-28). One of the ways this company had achieved double digit growth over a ten year period was to look closely at their franchise system. They found that they had a spectrum of franchisees – from high performers right down to poor performers. So over time they negotiated the weaker franchisees out of the business, largely by facilitating the acquisition of their outlets by ‘good’ franchisees. Not only did this improve the quality of their franchisees, it also meant each one held on average 5 franchises, making them even more loyal and committed to the business. Domino’s also had fewer franchisees to deal with, making coordination and control of the system more effective.