Are Bigger Franchises Better?

Written by : Jeff Elgin

Are Bigger Franchises Better?

Are Bigger Franchises Better?

The pros and cons of buying into a big name franchise system

Most people equate franchising with ubiquitous mega-systems: the large fast-food franchises like McDonald's or Subway, hotel operators like Marriott or other business-format franchises like Curves or ServiceMaster. These systems are big--really big--and they have advantages and disadvantages as franchise opportunities.
When you buy a franchise, you hope to receive at least two things: a valuable brand and 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. You can also pretty easily determine the franchise's track record by visiting their numerous franchisees who have been operating for a long time.

Another advantage is that large franchise systems can offer you, the new franchisee, safety and dependability. The risk of getting into a big franchise system is usually lower, because they've worked all the bugs out of their systems long ago. This doesn't mean you're guaranteed to succeed, but there's less uncertainty, due to the wealth of information available about the current system and its operators.

Mega franchise systems can have their disadvantages, too. Many very large systems have already built so many units that getting approved to open a new unit as a new franchisee can be difficult. These systems tend to favor successful current operators for new unit expansion opportunities, because that approach is less risky than taking a chance on a new, unproven operator.

More typically, new franchisees enter a large system by purchasing one or more existing units. 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. Buying an existing business with profitable operations can be a major advantage over building a new business from scratch, as you avoid the losses associated with the initial startup process. As long as you make sure you're getting a good unit and not buying someone else's troubles, this can be a great opportunity. 

Another advantage of big systems is that the professionalism and expertise of the support staff, the supply chain and virtually every other system component is often far greater than what you can reasonably expect in a smaller, newer franchise system. This can and should allow you to avoid mistakes and potentially realize lower operating costs compared to a less sophisticated system.

One potential disadvantage is that the larger a franchise system becomes, the more rules they have governing the conduct of existing franchisees. A large franchise system has determined and documented exactly how they feel the business should be run in every respect-from layout to operations to marketing. They're not looking for innovators to reinvent the wheel-they're looking for operators to execute their proven systems.

The really big franchise systems receive thousands of inquiries from prospective franchisees every month, and they don't have room to accommodate most of them. You may need to communicate your qualifications more aggressively to get a big franchisor's attention and consideration as a potential new franchisee. Whatever the challenges are in this area, the prize may be well worth going through the process.

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 big company as in a smaller one. Take the time to look into a number of alternatives when you're contemplating franchise opportunities--big company or small--and you'll find the right one to maximize your chance for success.

Source: Jeff Elgin at Entrepreneur