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10 Golden Pillars Of Franchising Business

Most of us would agree that among all the of the business strategy for expansion, franchising will always come to mind as one of the most effective and most popular choice which is highly popular among Food and Beverage (F&B) industry. Such business expansion method has been proven successful internationally by McDonald’s, Subway, Auntie Aunt’s, OldTown White Coffee and Bangi Kopitiam locally. The F&B sector and franchising have always had a close connection because this sector of the industry has the most numbers of Franchisors across the globe.

Understanding the Intellectual Property is basically the first and most important step before venturing in any F&B franchise. However in order for entrepreneurs to commercialize after protection of the business brand, they need to understand that all industry has its rule of thumb, even franchising.

Entrepreneurs who wish to step into franchising must understand and be willing to adopt a new mindset or approach as it will never be the same way from how they use to operate their business. Entering into the world of franchising is a double-edged sword – full of great opportunities but at the same time, threats lie ahead. Therefore, in order to be successful and able to have the staying power to sustain in franchising, entrepreneurs will have to have the suggested “10 Pillars of Franchising” achieve maximum business growth and become industry leader.

The 10 Golden Pillars of Franchising Business :

  • Legalities
  • Unique Selling Proposition
  • Business Concept
  • Franchise System
  • Accounts & Finance
  • Management Team
  • Innovation
  • Support Infrastructure
  • Marketing
  • Relationship Management

Pillar 1:Legalities
A great franchise system needs to be able to be executed within the confinement of the law. In Malaysia, it will be very relevant as we are among the only three countries in the world with a Franchise Act. The existence of a Franchise Act ultimately creates a healthy and conducive business environment that drives progression for the franchise industry. Hence proper franchise agreements which consist of all the terms related to the collaboration between the franchisor and franchisee and all the other relevant legalities issues should be documented.

Pillar 2:Unique Selling Proposition
An F&B entrepreneur needs to ask himself this question – “what is so special about his product or service?” It could be his secret recipe, system, advertising efforts, etc. There must be a strong and distinctive USP in order for his business to truly stand out from the rest. One of the key success factors to ensure the longevity of business is the entrepreneur’s ability to execute strategies that distinguish them from their competitors.

Pillar 3:Business Concept
If the business concept is to be an outlet where patrons could chill and chat then its interior design and menu mix should be done right to truly create that environment. F&B entrepreneurs need to always be able to deliver their concept rightly and have the ability to adapt to the ever-changing market demand. Entrepreneurs have to understand the important foundation that governs the business concept while having the ability to make their business concept to adapt to different business environment in order to stay competitive.

Pillar 4:Franchise System
Franchising is basically leveraging on the power of duplication. Hence, in order for the business expansion to grow successfully, it must possess a solid franchise system. Without a strong foundation, it will be near impossible to grow. A franchise system may be complex but it should not be too complex to the extent that it makes it difficult for all its franchisees to run their outlets smoothly. In short, a great franchise system must be able to simplify painstaking processes and yet ensuring that the simplified processes are able to be duplicated easily and successfully.

Pillar 5:Accounts & Finance
Many F&B-related businesses fail due to accounting issues. Franchising is no different in this manner. Entrepreneurs will need to do costing and projection of sales revenue versus overheads, while considering their own margin as franchisor and the margin of its franchisee in order for the whole franchise chain to operate profitably. Food wastages, pilfering and poor management of stocks are some of the major factors contributing to the downfall of franchise business. Hence, entrepreneurs must always ensure excellent bookkeeping, having good budgeting control and proper reserved funding for any unforeseen circumstances.

Pillar 6:Management Team
No matter how great the franchise system is, it still needs to be operated and executed by people. Even if the franchise system may not be very effectively executed in the beginning, as long as the right people are there in the system, the system will be improved and eventually become successful. The first impression of your service crew will always leave a mark that “make or break” the whole dining experience of customers. The right people will have a direct implication to your business growth both internally and externally. Many successful F&B franchises are being led by competent leaders and followed by people with a passion towards their jobs.

Pillar 7:Innovation
Have you ever noticed that successful F&B franchises always bring a wave of fresh new dining experiences in their outlets? This is because the franchise business owner understands the importance of staying relevant in the market. Research and development of the product mix, technologies, know-hows, ambience of the outlet and marketing campaign need to be done periodically. Without innovation, these businesses are at risk of being eliminated by the competition. Innovation has always been the key factor that contributes to the staying power and sustainability of prominent F&B brands due to the fact the market always have the demand for their products and their product could withstand the test of time.

Pillar 8:Support Infrastructure
Many franchise businesses fail because the franchisees have very little support from their franchisors. With the intention of branching out, the entire programme needs to be planned properly – considerations about franchisees must not be compromised. No matter where the franchisees are at – locally or internationally, no matter what problems they have – from machine breakdowns to insufficient raw supplies, a franchisor must be able to provide continuous support and assistance. Successful franchisors will never stop sourcing for better equipments, better integrated software, fresher raw materials even to the point of enhancing their training programme to their franchisees in order to support the whole franchise eco-system.

Pillar 9:Marketing
The difference between an F&B franchise business and a conventional business in the eyes of consumers lies in their marketing efforts. A franchise business needs to leverage on its strength in the number of outlets. So a good investment for a franchise business would be on branding and marketing that would create awareness, the ability to stay relevant and ultimately building brand loyalty. Failure to incorporate these activities will bring about business negatively and hindrance the growth of the F&B establishment.

Pillar 10:Relationship Management
This is one pillar with the utmost importance, in order for the rest of the pillars to be executed effectively and smoothly. Managing relationships has three phases – (i) managing the franchisor’s own internal management team; (ii) managing the relationship between the franchisor and its franchisees; and (iii) managing the relationship with the customers.

To conclude, understanding the importance of the intellectual property rights and the most important investment of all will be securing the trademark protection. After securing the intellectual property rights, entrepreneurs from the F&B sector could now expand their businesses without restriction and hesitation. We would like to emphasize that both the intellectual protection and commercialization tasks should be carried out by the professionals.