Selling to Franchise Organizations: An

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Selling to Franchise Organizations: An
Selling to Franchise Organizations:
An Opportunity on Every Corner
A White Paper
1
Selling to Franchise Organizations:
An Opportunity on Every Corner
Introduction
Definition
A franchise is a business
arrangement where the developer/
owner (the franchisor) of a
business concept grants others
The market is made up mainly of small and medium businesses with the need to market (the franchisees) the licensed right
locally. This offers print service providers the opportunity to aggregate volume, manage to own and operate a business
based on the franchisor’s business
distributed marketing programs and sell digital printing because the market relies on
customized materials produced on-demand.
concept, using its trademark.
Franchises are a solid component of the global business landscape. The franchise
business model is used by more than 70 different industries and the sector earns
more than $1.5 trillion in revenues each year, according to the International Franchise
Association®. The franchise market offers print service providers a dual opportunity
to serve the national needs of the franchise system and the individual needs of
franchisees.
Defining the Franchise Market
Franchising is the practice of using another firm’s successful business model. A franchise
is a business arrangement where the developer/owner (the franchisor) of a business
concept grants others (the franchisees) the licensed right to own and operate a
business based on the franchisor’s business concept, using its trademark. In exchange
for using the parent company’s strategies and trademarks, the franchisee pays an initial
fee and ongoing royalty fees, advertising fees and other fees to the franchisor. As part
of the franchising agreement, the parent company usually provides the franchisee with
support, including training, advertising, marketing and regional promotion. Franchisors
may also sell supplies directly to their franchisees.
There are three basic types of franchises:
• The business format franchise is the most common franchise type. In this model,
a company supplies owners with an established business, including its name and
trademark. The franchise company generally assists the independent owners
considerably in launching and running their businesses. In return, the business owner
pays fees and royalties. In most cases, the franchisee also buys supplies from the
franchisor. Fast food restaurants are good examples of this type of franchise.
• Product distribution franchises sell the franchisor’s products and act as suppliers or
dealers. In product distribution franchising, the franchisor licenses its trademark and
logo to the franchisees, but typically does not provide them with an entire system for
running their business. To obtain these rights, store owners must pay fees or buy a
minimum amount of products. The industries where this type of franchising is most
often found are automobiles and gasoline. Tire stores, for example, operate under this
kind of franchise agreement.
• Through manufacturing franchises, a franchisor grants a manufacturer the right
to produce and sell goods using its name and trademark. This type of franchise is
common among food and beverage companies. For example, soft drink bottlers often
obtain franchise rights from soft drink companies to produce, bottle and distribute
soft drinks.
2
Franchises reach across nearly every industry. There are over 120 different types of
franchise businesses available today. Examples of more popular franchises include
McDonald’s®, SUBWAY®, Domino’s Pizza® and the UPS® Store. The franchise market is
broad and offers wide opportunities for selling communication products and services.
Here is list of key types of franchises to put the scope of the opportunity into
perspective:
• Automotive: Includes motor vehicle parts and supply stores, tire dealers, automotive
equipment rental and leasing, and automotive repair and maintenance.
• Commercial and Residential Services: Includes building, developing and general
contracting; heavy construction; special trade contractors; facilities support services;
services to buildings and dwellings; and waste management and remediation
services.
• Quick Service Restaurants: Includes limited-service eating places, cafeterias, fastfood restaurants, beverage bars, ice cream parlors, pizza delivery establishments,
carryout sandwich shops, and carryout service shops with on-premises baking of
donuts, cookies and bagels.
• Table/Full Service Restaurants: Establishments primarily engaged in providing
food services to patrons who order and are served while seated (i.e., waiter/waitress
services) and pay after eating.
• Retail Food: Includes food and beverage stores; convenience stores; food-service
contractors; caterers; retail bakeries; and beer, wine, and liquor stores; as well as gas
stations with convenience stores.
• Lodging: Includes hotels, motels and other accommodations.
• Real Estate: Includes lessors of buildings, self-storage units and other real estate; real
estate agents and brokers; and property management and other related activities.
• Retail Products and Services: Includes furniture and home furnishings stores,
electronics and appliance stores, building-material and garden-equipment and
supplies dealers, health and personal care stores, clothing and general merchandise
stores, florists and gift stores, consumer goods rentals, photographic services, and
book and music stores.
• Business Services: Includes printing, business transportation, warehousing and
storage, data processing services, insurance agencies and brokerages, office
administrative services, employment services, investigation and security services,
tax preparation and payroll services, and heavy equipment leasing.
• Personal Services: Includes educational services, health care, entertainment and
recreation, personal and laundry services, veterinary services, loan brokers, credit
intermediation and related activities, and personal transportation.
Franchises Represent Various Size Businesses
Businesses of all sizes operate under the franchise model. Here is a description of the
types of franchises by size:
• A single-unit franchise is a small business owned and operated by one franchisee.
• Multi-unit franchises are owned by one franchisee and span multiple locations.
Generally each location has a single unit agreement.
• A master franchisee is granted the right and obligation to sell franchises, in addition
to operating a franchise. A master franchisee typically collects royalties and fees that
are generally split between franchisor and master franchisee, and provides support
services to “sub-franchisees”.
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Franchises of all sizes need to pursue strategies to acquire customers, retain customers,
expand share of wallet and build customer loyalty. These activities occur at all levels
of the franchise system. Print is an important component of supporting franchise
operations business needs.
Defining the Scale of the Global Franchise Market
The global franchising industry is expected to reach U.S. $3.96 trillion by 2015,
according to Global Industry Analysts, Inc. Expansion via franchising is an attractive
option for companies looking to expand abroad without incurring high costs.
Additionally, international franchisees already possess many inherent qualities needed
to succeed abroad, like the ability to speak the native language.
Franchises in the U.S., England, Australia and Canada have found a high level of success
in spreading their business concepts around the world. In addition, France, Spain and
Germany are getting into the international franchising game. The table below lists
the top 20 global franchises on Franchise Direct’s annual list of the top 100 global
franchises.
Each franchise on the list has excelled at international expansion, investing time
and resources to acquire linguistic capabilities and adapt to cultural sensitivities.
The franchises in the top 100 all share a defined identity, a clear business plan,
a commitment to training and support, an ability to innovate and sensitivity to
environmental issues.
Rank
Franchise Name
Country
Industry
1
®
SUBWAY
USA
Sandwich and Bagel Franchises
2
7-Eleven®
USA
Convenience Store Franchises
3
McDonald’s
USA
Fast Food Franchises
4
KFC
USA
Chicken Franchises
®
®
5
Burger King
USA
Fast Food Franchises
6
Pizza Hut®
USA
Pizza Franchises
7
Wyndham Hotel Group
USA
Hotel Franchises
8
Hertz
USA
Car Rental and Dealer Franchises
9
Ace Hardware Corporation®
USA
Home Improvement Retail Franchises
10
InterContinental Hotels Group
UK
Hotel Franchises
11
GNC Live Well
USA
Wellness Products and Services
®
®
®
12
Europcar
France
Car Rental and Dealer Franchises
13
Carrefour®
France
Convenience Store Franchises
14
Dunkin’ Donuts®
USA
Bakery and Donut Franchises
15
DIA
Spain
Convenience Store Franchises
16
CHOICE HOTELS
USA
Hotel Franchises
17
Taco Bell®
USA
Fast Food Franchises
18
Tim Hortons
Canada
Bakery and Donut Franchises
19
Domino’s Pizza
USA
Pizza Franchises
20
Snap-on Tools
USA
Automotive Repair Franchises
Source: Franchise Direct
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®
®
®
®
Due to globalization and the
dismantling of trade barriers,
franchises have achieved better
economies of scale, which allows
them to grow and develop in
foreign markets.
Emerging markets, too, offer franchisors growth opportunities. High levels of consumer
demand, coupled with relatively low levels of competition, offer a lucrative opportunity
for many franchisors to expand into emerging markets. Eighty percent of the world’s
population lives in an emerging market and represents an estimated 25 percent of
the world’s gross domestic product. The rise of China’s middle class and India’s per
capita income are providing significant new markets for franchises to operate. Megafranchising chains like Yum! Brands (Taco Bell®, KFC®, Pizza Hut® and East Dawning)
have established a presence in India.
Franchise businesses have much to offer emerging markets because they are designed
to be replicated. Thus, they require less experienced entrepreneurs and provide
business-learning opportunities within a support structure.
Franchise Communication Opportunities
Marketing is a Key Focus
Most franchisors have comprehensive marketing plans in place for the overall
franchise. These plans often require franchises to invest in marketing. The parent
franchisor’s plan typically includes some level of funding for traditional mass-media
advertising campaigns, Internet advertising, public relations and direct mail efforts.
Even if franchisors provide national marketing, franchisees may be allowed, and
even encouraged, to support local marketing initiatives on their own within certain
restrictions. In addition, franchisors often provide guidance on how to develop effective
marketing programs for a local area through a cooperative marketing fund, to which
the franchisees contribute a percentage of their gross income.
Franchisors that do not manage marketing on a national level usually provide an
outline for the franchisees to follow in preparing their marketing plan on a local level.
Maintaining a steady, consistent customer base is critical to the success of any business,
including a franchise. Printed marketing materials such as brochures and flyers help get
the word out about a particular franchise in the area and provide information about
specials that would attract new customers. Loyalty and reward programs, referral
programs, special promotions and coupons are popular marketing methods used by
franchises to keeping customers returning. All of these activities can be supported by
printed materials.
Furthermore, franchisees are active in local community activities and participate in
charitable organizations. This involvement can lead to sponsoring local activities that
need to be supported by print.
Marketing Funding Required
Franchisors generally require franchise owners to pay ongoing fees to support
marketing activities. Typically, franchisees pay a percentage of their weekly or monthly
revenues into a fund, and the franchisor—either alone or with input from franchisees—
spends the contributions on marketing to build awareness and the reputation of the
brand. However, the franchisor generally does not have to answer to franchisees on
its decisions for system-wide advertising, and most franchise agreements state that
individual franchisees are not guaranteed to see any benefits whatsoever from the
expenditures of the marketing fund.
Franchisees generally have their own marketing and advertising budgets for local
marketing and promotion efforts. Local franchise marketing enables an establishment
to get the word out about its location, service and products to the public in its area,
while maintaining the franchise identity. Local marketing is a critical sales driver and
there are many opportunities for a franchise to use print to support marketing and sales
efforts, from direct mail to flyers to signage to brochures.
The ultimate purpose of local
marketing is to do just that:
encourage customers to consume
the franchise’s service and
increase spending.
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Franchise systems often use cooperatives, or buying groups, to purchase products,
marketing, advertising and other services to leverage buying power and obtain better
service. These purchasing co-ops present an opportunity to aggregate the print volume
of several entities in a franchise system.
Demand for Marketing Supply Chain Optimization
Finding ways to accommodate the diverse local marketing needs of franchises, while
maintaining brand control, is a common marketing communication challenge for
franchise systems. Providing franchises with solutions such as online ordering of printed
materials, variable data printing, regional versioning, and more, can address these
challenges.
Franchisors are looking for
providers that offer a complete
approach to managing the
marketing supply chain.
Franchisors are looking for providers that offer a complete approach to managing the
marketing supply chain where marketing and communication materials are produced
when needed and in the exact quantities required.
The franchise communication channel can be complex, and there is need for consistent
brand integrity and decentralized access to printed materials. There is an opportunity
to provide franchisors customized, brand-compliant marketing printed materials
through Web-to-print systems. These systems allow franchisees to view, select and
personalize a variety of corporate-approved collateral, from postcards and flyers to
brochures, print ads and more.
Selling to Franchises
Franchisors generally don’t provide for all the needs of their franchisees. While a few
do, most are unable to and the door is open to print service providers. Here are some
key recommendations for growing your business in serving this niche of hundreds of
thousands of prospects.
Define and Scope the Opportunity
There is a wealth of online information available on franchises. Entrepreneurmagazine.
com, FranchiseGator.com, Franchise.com and the International Franchise Association
are a few examples of resources (see a more comprehensive list below) to help you
learn about franchising, target franchise systems, identify key market trends and
provide insights on support offered to franchises.
Online websites covering the franchise market often include sections detailing
individual franchises, including what they promise franchisees in their marketing
materials. This is valuable information in that you can identify any service gaps and fill
them with your services.
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Web-to-print systems enable
franchisors to maintain critical
brand consistency, while allowing
franchisees to customize pieces
with special offers or images.
Global Resources for Researching and Following the
Franchise Market
• American Association of Franchisees and Dealers, www.aafd.org
• Austrian Franchise Association (ÖFV), www.franchise.at
• Belgian Franchise Federation (BFF), www.fbf-bff.be
• Brazilian Franchise Association (ABF), www.abf.com.br
• British Franchise Association (BFA), www.thebfa.org
• Camara Venezolana de Franquicias (CVF), www.profranquicias.com
• Canadian Franchise Association (CFA), www.cfa.ca
• Chain-Store and Franchise Association (CCFA), www.ccfa.org.cn
• Croatian Franchise Association (CAF/FIP), www.fip.com.hr
• Czech Franchise Association (CAF), [email protected]
• Danish Franchise Association (DFA), www.franchiseforeningen.dk
• Ecuadorian Franchise Association (AEFRAN), www.asofranquicias.com
• Egyptian Franchise Development Association (EFDA), www.efda.org.eg
• European Franchise Federation (EFF), www.eff-franchise.com
• Every Franchise, www.everyfranchise.com
• Finnish Franchising Association (FFA), www.franchising.fi
• Franchise Association of India (FAI), www.fai.co.in
• Franchise Association of New Zealand (FANZ), www.franchiseassociation.org.nz
• Franchise Association of South Africa (FASA), www.fasa.co.za
• Franchise Bison, www.bison.com Argentinean Franchise Association (AAMF),
www.aafranchising.com
• Franchise Council of Australia (FCA), www.franchise.org.au
• Franchise Opportunities, www.franchiseopportunities.com
• Franchise.com, www.franchise.com
• Franchise-America, www.franchise-america.com
• Franchising and Licensing Association (FLA), www.flasingapore.org
• French Franchise Federation (FFF), www.franchise-fff.com
• German Franchise Association (DFV), www.franchiseverband.com
• Greek Franchise Association, www.franchising.gr
• Guatemala Franchise Association (AGF), www.guatefranquicias.com
• Hong Kong Franchise Association (HKFA), www.franchise.org.hk
• Hungarian Franchise Association (HFA), www.franchise.hu
• Indonesian Franchise Association (AFI), www.franchiseindonesia.org
• International Franchise Association (IFA), www.franchise.org
• International Franchise Association, www.franchise.org
• Italian Franchise Association (AIF), www.assofranchising.it
• Japanese Franchise Association (JFA), www.jfa-fc.or.jp
• Korean Franchise Association (KFA), www.ikfa.or.kr
• Lebanese Franchise Association (LFA), www.lfalebanon.com
• Malaysian Franchise Association (MFA), www.mfa.org.my
• Mexican Franchise Association (MFA), www.franquiciasdemexico.org
• Moroccan Franchise Association (FMF), www.fmf.ma
• Netherlands Franchise Association (NFV), www.nfv.nl
• Phillipines Franchise Association (PFA), www.pfa.org.ph
• Polish Franchise Organization (PFO), www.franchise.org.pl
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• Portuguese Franchise Association (APF), www.apfranchise.org
• Russian Franchise Association (RARF), www.rusfranch.ru
• Slovenian Franchise Association (SFA), www.franchise-slovenia.net
• Swedish Franchise Association (SFF), www.franchiseforeningen.se
• Swiss Franchise Association (SFV), www.franchiseverband.ch
• Taiwan Franchise Association (TCFA), www.franchise.org.tw
• The Franchise Doctor, www.franchisedoc.com
• The Wall Street Journal, startup.wsj.com
• Turkish Franchise Association (UFRAD), www.ufrad.org.tr
• World Franchises, www.worldfranchising.com
Before approaching a franchisee, research how many locations are in your geographic
area to determine if you should sell to a group or individual. You should also know
how many units there are in the system nationwide and in the regional area you
serve. Many franchise systems have purchasing cooperatives for advertising and
marketing materials depending on their system. A solid strategy is to approach one
or two franchisees in in your market and prove your abilities to those firms. If you can
demonstrate the value delivered to franchisees, you have a high potential of getting
acceptance from the franchisor and then from many of the franchisees in the system.
Evaluate Targets
Research and determine the types of franchises to target. Key evaluation criteria
include:
• System size based on numbers of units
• Sales revenue for the system
• Stability and growth
• Number of years in operation
• Market expansion status
• Best practice in the areas of franchisee support and training
• Environmental policy
• Social responsibility
Targeting Customers
Almost all franchisors have operation teams that regularly visit each franchisee.
Depending on their niche, those visits may occur once a year, once a quarter, once
or even twice a month. However, many of these teams are charged with enforcing
compliance issues and standard operating procedures rather than teaching sales,
marketing and communications techniques. This presents an opportunity for print
service providers to get in the door by hosting training events.
Many franchisees do not understand KPIs (Key Performance Indicators), according
to The Franchise Doctor website. Showing a franchisee how to measure important
marketing KPIs and explaining how your services can improve their current status is a
positive step to winning work.
In addition, be prepared to quantify how your services will improve the performance
and profitability of the franchisee’s operation.
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It’s critical to determine the key
concerns of franchise owners and
how your services will address
them. It’s also critical that you
identify ways to quantify and
prove that your services provide
benefits.
Checklist for Evaluating Customer Opportunities
Prospecting and selecting the customers best aligned to your offering starts with solid
research and opportunity evaluation. The following questions provide a framework
for evaluating the communications opportunities in franchise organizations. The
answers to these questions can be found on franchisors’ websites and through sales
discussions with franchises.
1. How much is the marketing/ad fund contribution per month? Are all territories
required to provide the same contribution?
2. What are the different marketing avenues the franchise uses—direct mail,
television, radio, billboard, newspaper, Internet?
3. How does the franchise website look vis-à-vis competitors? Does the website have
support for customer ordering, menu, coupons, nutrition information, etc.?
4. Does the franchise have a mobile application strategy?
5. What types of customer loyalty programs has the franchise launched in the
past—gift cards, frequent purchase, etc.?
6. How does the franchise divide the marketing budget between general (nation or
region wide) versus local (territory wide) marketing?
7. What support does the franchise provide for local marketing specific to individual
stores such as marketing brochures, group purchasing, etc.?
8. Does the franchise provide support in terms of obtaining and analyzing a
customer database?
9. How much influence do franchisees have in important marketing decisions? Is
there a marketing committee comprised of franchisees to provide input into
marketing decisions?
10. Does the franchise seek approval/input from franchisees before launching major
marketing campaigns?
11. How is the franchise brand perceived in the minds of customers? Does the
franchise introduce new products/marketing campaigns periodically to maintain
its brand’s strength?
Adapted from SmallBizViewpoints (www.smallbizviewpoints.com)
Networking, Prospecting and Thought Leader Positioning
Networking and prospecting are fundamentals to any selling effort. Succeeding on
this front means joining organizations and attending the events of customer targets.
Joining organizations that serve franchises offers a means to learn about market
trends and an opportunity to meet sales prospects. Industry organizations host
educational and networking events. Participating in these events gives you a front
row seat into the key challenges you can solve for potential customers. In addition,
speaking or exhibiting at these events offers a venue to position your firm as the goto expert resource for marketing and communication needs.
Offer to speak at franchisee
training sessions or host sessions
at your location on marketing and
communication topics.
Speaking at an industry event or holding an educational event that provides value to
potential customers demonstrates your competency. As noted previously, franchisees
send a percentage of every sales dollar to the home office. In turn, many are reluctant
to spend money for outside services. Demonstrating your organization’s ability to
identify, understand and offer solutions to marketing and communication challenges
positions your firm as the leader and increases your chances of winning work.
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Seek Referrals
Customer referrals are an excellent and efficient way to generate new business.
Referred clients are presold and a referred company has credibility and trustworthiness.
After providing services to franchisees, ask them to recommend you to the
headquarters staff so you can approach them about serving the needs of all
franchisees.
It is common for franchises to share vendors with others in the system and actively
seeking endorsements both verbally and in writing is a solid sales strategy that should
be practiced daily. Asking for referrals should be integrated into the sales process, not
an afterthought. It is a proactive strategy and not something we leave to “word of
mouth.” Word of mouth is passive, waiting for the phone to ring; referral selling is active
and results-oriented.
Franchises Are a Model Market for Selling Print
Selling communication products and services to franchises presents print service
providers with a huge opportunity. Franchises are everywhere and cover just about
all markets. The breadth of the type and size of franchised businesses enables print
providers to expand in current markets served and grow in new markets. Gaining
franchisees as customers also provides a route to scale sales within the franchise
system.
Franchises’ demands for continuous marketing coupled with vigilant brand control
align with many print service providers offerings, such as online ordering, variable
data printing and short run digital printing. Firms that offer a full-service approach
to managing marketing efforts and take the time to learn the market are in a prime
position to win sales in the franchise market.
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