A franchise marketing system involves the marketing and distribution of an already established product or service. In this system, a business owner or a trademark owner grants the right to another individual or a group of individuals to use their business model to sell a product or provide a service. More often than not, the product or service in question and the brand name also belong to the business owner.
A franchise marketing system is an efficient way of expanding one’s business, and companies like McDonald’s, KFC, Dominos, etc., have used it to grow their businesses exponentially. The business owner is called the franchisor, and the individual granted the rights to make use of the franchisor’s product, brand name, trademark, etc., is called the franchisee. Both parties sign a contract. The franchisee agrees to pay a fee to the franchisor, who is absolved of all financial risks.
The franchise marketing system is beneficial to both parties, and thus, it is a popular business expansion approach among big companies. Yet, you might require some assistance from franchise marketing experts at Local Brand Advisor to familiarize yourself with this concept.
Benefits of Franchising
A franchise marketing system has multiple benefits to both franchisors as well as franchisees. It is considered relatively safer for everyone involved. Thus, many people prefer acquiring a franchise license instead of going about the traditional way of starting a business. With the ongoing economic development and the globalism surge, international corporations are actively looking for talented business people to expand their businesses in new territories under the franchise system.
Moreover, even small businesses are adopting this model of business to expand in a more local context. Thus, it is safe to say that franchise marketing systems can prove to be an excellent way to enter the business world. Following are some benefits of a franchise marketing system for both franchisors as well as franchisees.
- International/National Expansion – It is far easier to expand one’s business internationally or intra-nationally as the franchisee possesses greater knowledge of their own territory. Thus, with capable franchisees, a company can grow exponentially nationally and internationally.
- Customer Loyalty – A franchise marketing system builds a loyal customer base, attracting more customers.
- Effective Advertising and Promotion – With the franchisee’s cooperation, a brand can implement better advertising and promotion strategies to attract more customers. A franchisee can use their local knowledge to help the brand build a better promotion campaign suitable for that particular region.
- Brand Equity – With rapid expansion and increased visibility, brands can increase their brand equity very quickly.
- Limited Risks and Liability – A franchise marketing and distribution system involves little to no financial risks for a franchisor. Most of the liabilities and risks are borne by the franchisee. Thus, if a particular franchised establishment fails, the franchisor will not bear most of the brunt. Moreover, the capital invested by the franchisor under this system will be relatively lesser.
- Resource-Friendly – The franchisor can save time and resources such as employees under this system as a large chunk of responsibility is delegated to the franchisee.
- Exponential Growth – Compared to a traditional business expansion model, wherein the business owner oversees all expansion steps, the franchise marketing and distribution is faster in terms of company growth. This is because of the cooperation between the franchisor and the franchisee and a shared vision and responsibilities.
- Established Product/Service – The franchisee acquires a product or service already established in the market and carries a perceived value in customers’ eyes. Thus, the franchisee does not have to invest a lot in promoting and marketing the said product or service as the customers are already familiar with it. Moreover, such a product or service will attract customers from day one, and thus, the chances of incurring losses are lesser.
- Easy Access to Resources – In many cases, a franchisee gets easy access to resources such as training programs for employees, business crash courses, loans, etc. Lenders usually do not hesitate to loan money to franchisees due to the original company’s value and perception in the market. Lenders know that a franchisee business is more likely to succeed and has low risks associated with it.
- Reduced Costs of Operation – Franchisees can also avail discounts from the franchisors and trusted suppliers, thus reducing costs of operation.
- Marketing Assistance – Due to the already established nature of the product or service, a franchisee does not have to invest a lot in marketing and promotion. However, marketing is an essential aspect of a business, and most companies recognize that. Thus, franchisors often assist franchisees with marketing and promotion campaigns. This assistance is often in the areas of market research and the pooling of resources.
Due to the shared responsibilities, risks, and overall ease of doing business under this system, franchise marketing and distribution systems have become quite popular in the 21st century. Thus, it is a good idea to keep an eye out for franchisors looking to expand and for talented business people looking to grow businesses.