Does Big Name Create Big Earnings and Security?

Most people equate franchising with those Top-of-the-Mind mega systems. We think of names like McDonald's, Burger King, Taco Bell, Subway and perhaps Dominoes Pizza. Hotel chains like Wyndham, Hampton Inns, Hilton and even Marriott have large numbers and international reach. Other business-format franchises like H&R Block, Thrifty Car Rental Curves or ServiceMaster are just big.

But what is the advantage of this and are there disadvantages?

I am sure you've guessed the answer already haven't you?

First-time franchise buyers are typically hoping to receive at least two benefits from their decision. They hope the franchise has a valuable brand and they expect it to have a proven operating system. The primary advantage of big franchise companies is that both of these are basically set in place. You can easily research consumer awareness and attitudes about the brand just by asking around. A well planned visit to operational outlets will provide you with some local subjective information about their customer service and operational execution.

There are other advantages of course. Safety and security are assumed. The risk of failure when aligning yourself with a larger franchise system should be lower. Most of these are more mature systems that have worked all the chinks out of the armor which is their business system. Success isn't guaranteed but you will feel more secure..

Is Bigger Always Better?

Of course you know the answer is no. The major downside issues are:

• Cost of entry (the value proposition) will be greater per unit
• Reduced Opportunity because of limited territory availability
• More maturity – more applications = Greater Experience Expected on the part of the franchiser
• The tendency of these systems to favor seasoned operators with current holdings
• There is less wiggle room for entrepreneurial spirit
• The older and larger the system the greater the expected compliance

The bottom line is that any large system has developed enough territory and build-out significant units that approval to open a new unit as a new franchisee can be a long drawn out process.

It is more likely a new franchisees will enter a large franchise organization by purchasing an existing franchise. While this can actually be an advantage to you, since it allows you to review the operational and financial performance of the unit or units before you decide to buy (And make sure that you do!). Buying an existing business with profitable operations has massive challenges, primarily related to relational issues with clients, employees and a fully developed culture. What appears a benefit, in terms of the record, is not nearly as good as over 50% of all re-sale franchises fail within the first 24 months. I never recommend resales unless I first and individually investigate them personally.

My Bottom Line

While I understand the mindset surrounding the issue of branding the fact of the matter is that there are 1000's of national franchise companies all of whom have highly successful business models and profitable franchisees. You and I can only name a few in comparison to the size of the market in franchising. What about the rest? Where is their branding? The truth is you and I may only remember them if our memory is jarred (Snap Fitness, Massage Envy, J. D. Byriders, Friendly's, Disaster Kleenup International and 1000's more. By the way, the ones I named are even in the top 100 in terms of operating units!) but the people who matter, their client and prospect base knows who they are...intimately.

What's the point?

The point is that virtually every franchise business that is successful in North America and Europe simply needs the right franchisee that matches their profile in order to succeed. Branding and market positioning is created at the local level; the level at which the franchise unit exists. Find the franchise that matches your goals, skillset, interests...YOUR priorities for business ownership and you will find a beautiful thing be it large or start up.

Every franchise is seeking franchisees with the talent and capital to make their business a success. Big or small, most franchise companies care deeply about the success of all their franchisees. You can find just as much heart in a small company as in a larger one; frankly usually more and more passion and more communication. My recommendation is hook up with a consumer franchise consultant. Call me if you need a recommendation. With their assistance you can take the time to look into a number of alternatives when you're contemplating franchise opportunities--big company or small--and with their expertise and previous investigation into the various systems you'll find the right one to maximize your chance for success.

John is a 26-year professional in the franchise industry. Previously he has been a franchisee, a franchise executive and an advocate/consultant to the public. He currently works with and has worked for dozens of franchise companies. He is the founder and managing partner of Wilson Associates and can be reached at dr_franchise@consultant.com