Logos, layouts and logistics: Franchising in today’s market
Hearing the word “franchising” usually brings to mind the golden arches of McDonald’s, the lively pink and orange of Dunkin’ Donuts or the “Eat fresh” slogan from Subway. In actuality, franchising encompasses far more than just restaurant chains and their identifiable marks. Dr. Vinay Garg, associate professor of management, has been studying franchising and its applications in the business world for the past 15 years.
“Most people think of franchising as an industry, but the fact is that franchising is actually not an industry; it is a business model,” said Garg. “Franchising is everywhere. It’s in education, hospitals, aviation training and even interior decoration.”
Over the years, Garg conducted most of his research in franchising, particularly multi-unit franchising, by surveying more than 100 franchises in various fields. The results provided Garg with enough information to create statistical models that explain the success of multi-unit franchising. But surveying comes with its own challenges, so he also employs triangulation.
The basic business model
So what is franchising? When an entrepreneur is looking to start their own small business, they have the option to buy a franchise. With a franchise, the franchisee will follow established procedures that have previously been proven successful and pay regular royalties to the franchisor.
“Instead of the franchisor having a 500-restaurant chain, they can make 5,000 or 10,000 in the same time because they don’t have to invest their own money or task their managers with the job of building one restaurant at a time,” said Garg. “McDonald’s has over 36,000 franchises in 100 plus countries. More than 80 percent of McDonald’s restaurants worldwide are franchised. Each day a new franchisee is building a store somewhere in the world, but McDonald’s is free from having to invest and worrying about the nuts and bolts of creating and operating it.”
Franchises can be a great opportunity for entrepreneurs looking to start their own business without the hassle (or struggle) of the trial-and-error that comes with starting a business from scratch. In addition, franchises benefit from the name recognition that comes with a well-established brand.