Sometimes size does matter. When talking about a piece of chocolate cake – bigger is always better. When evaluating new cell phones – smaller gets the nod. In franchising, there are some advantages to being part of a large franchise system and other advantages to joining a small system. The question is not, “Which is better?” but “Which is better for you?”
Advantages of Large Franchise Systems
Everyone is familiar with the really big franchise companies such as McDonalds, Subway. Each has over 25,000 units and they are ubiquitous around the country if not the world. Since franchise companies generally start out with a single unit, growth of this magnitude takes years and years to achieve. Large franchise companies have had the opportunity to test and prove their value over and over again, which is the main attraction of franchising ? a proven operating system.
Perhaps the most obvious advantage of a large franchise is name recognition. When you see the Golden Arches your mouth will start watering even before you smell the hamburgers frying. Larger systems will have larger advertising budgets, meaning there will be more, and usually better, national advertising campaigns, increasing name recognition. Even moderately large systems, those with units numbering in the hundreds, have been around long enough to have tweaked their operations to the point they provide a pretty low risk to potential buyers. A smaller or newer franchise system may have to adjust their operations many times before achieving optimal results.
Support is an additional advantage of being a franchisee in a large franchise system. To achieve growth, a company will need to have a dedicated support staff that can help franchisees with any issue or problem. Also, larger companies are more likely to provide new franchisees with such specialized resources as demographic profiling, real estate assistance and technical support.
Advantages of Small Franchise Systems
With all of the advantages of a large franchise system, not everything is a bed of roses. First of all, there’s the whole idea of being a small fish in a large pond. If you like individualized attention, in a small system you may have a direct line to the company’s president or vice president. In a large system, you contact person may be a low-level employee in the giant corporate structure.
Franchisees in a small franchise system can have a greater say in the business as a whole and will sometimes have more flexibility in managing their own businesses. Once a system grows to a substantial size, there will generally be extensive rules for franchisees as well as a staff who ensures the compliance of each and every regulation – from the color of your businesses’ roof to the way you greet customers at the counter. At a smaller franchise system you will usually find fewer rules. If you like to do a bit of experimenting, a smaller franchise company may allow you to do so and will even welcome your ideas and suggestions.
Another advantage of smaller franchise systems is that they are less likely than large franchisors to be sold out in your area. If you want to join a large franchise, you may have to wait until an existing franchisee wants to sell.
And that brings up another point: Subway does not need to look for franchisees. They probably get hundreds of inquiries every week if not every day. Of those inquiries they are only going to be interested in awarding franchises to people with very strong qualifications. A smaller, newer franchise company is going to be more interested in you and may be willing to make accommodations so that you can join the team.
The franchise company and the people running it are more important than the size of the business as far as franchisee satisfaction goes. If you are interested in a business but unsure if you’d be a good fit, there’s one sure way to find out and that’s by talking to a number of franchisees in the system.
You will need to ask if they felt the support and training they received prior to opening their franchise unit was adequate. Find out how they feel about the support they are currently receiving and if they feel they are on track to meet their financial goals.
Both large and small franchise concepts have advantages and disadvantages so the more you understand about the company and your role as a franchisee, the better equipped you will be to make the decision.
Kimberley Ellis is the President of Bison.com, a leading online resource for franchise and business opportunities. She has been quoted as an industry expert in USA Today, Wall Street Journal and a variety of local and regional publications regarding trends in business and franchising. Kim combines her entrepreneurial spirit with a diverse background in marketing and operation to help others succeed in franchising.
