Since the beginning for franchising, the question on managements mind is what’s our strategy? Are we company operated or franchise operated? Is there an ideal number of corporate owned and operated stores that make sense or should we adopt a model of 100% franchising while managing and regulating brand standards.
In my experience, having a portfolio of corporate owned locations is very important. Whether you are a veteran brand or a startup, one of the key elements to the long-term success of the franchise system is having a mix of corporate owned and managed stores with franchised stores. If we look at most of the successful franchises across the globe, they started out with corporate owned locations. As a matter of fact they opened several corporate stores or restaurants in order to prove their concept, align their operating systems and have a working prototype for a franchisee.
Having corporate owned stores puts you in the middle of the action by keeping you in direct contact with your customers’ needs, wants and preferences. This is vital whether you have just entered the market or are a mature brand. Having corporate owned stores also gives you the ability and flexibility to test new items and get instantaneous feedback on what will keep the customers interested and engaged and what won’t. This way your offerings stay in line with the latest trends, attract new customers and gives you confidence before introducing the new item to the franchising system. Without having tested and proved a policy, procedure, or new item it would be very difficult to convince a franchisee to introduce or adopt the same. This helps you become more credible and give you an authoritative position.
Keeping the brand fresh and modern is a key in today’s global market. If you’re involved in franchising you know that trying to convince your franchisee to update is an up-hill battle. Having said that, if you rebrand, refresh and invest in your corporate owned stores first it shows your personal involvement and commitment. Once you start to get actual metrics and see results it will build your confidence and you can get your franchisees to buy-in much easier. This momentum then trickles and a domino effect is usually seen.
So in my experience your focus should not just be expansion of your franchising system but it should also include a strategy to grow corporate owned stores whether through new construction, acquiring locations or acquiring locations from retiring franchisees.
Author: Haider Shah