It has been said, on more than one occasion, that what is good for the franchisee is good for the franchisor.  This is certainly true in a very general sense.  After all, the more profitable the individual franchises become, the more alluring the franchisor becomes in the eyes of new investors.  Since each new franchise is a source of royalties and other income for the franchising company, the franchisor has a steep interest in boosting its appeal by boosting the success of its existing franchises.

As we say, though, this mutually beneficial arrangement is only true in the broadest sense.  When taken to the level of the individual franchise owner’s relationship with the franchisor, the truth may be somewhat different.  While the franchisor may, overall, act in the best interest of the majority of franchisees, the individual franchisee may, at times, find him or herself at odds with the franchising company.  This can be most easily seen in the area of marketing.

Marketing Strategy

As stated, the franchisor’s aim in marketing campaigns is to benefit the broadest range of its franchises.  This is not a light undertaking, and many franchisors expend a great amount of money and energy into marketing research to determine just what tactics will be most likely to succeed for the greatest number of franchisees.  On the franchisees’ end, there is probably little or no involvement into the process of developing marketing strategy.  This is simply one of the cost of franchising for the individual owner.

Marketing Conflict

Conflict arises when the marketing techniques hit upon by the franchisor as most likely to benefit the greatest number of franchises actually work against a percentage of its franchise owners.  Quite simply, what plays well in one region may not be well received in another.  In these instances, the goals of the franchisor come into direct conflict with those of a small group within their organization.

The CKE Example

A rather prominent example of this can be seen in advertising campaign carried out by CKE to promote business in the franchisor’s Carl’s Jr. and Hardee’s fast-food chains.  CKE, deeming that the child/parent market was fairly well cornered by competitors such as McDonalds, decided to target the less sought after demographic (in the fast-food industry) of young men.  To accomplish this aim, they ran a series of advertisements featuring prominent female celebrities in risqué outfits and scenarios, designed to appeal to the average young male.

While these advertisements played remarkably well in most areas and many of the franchise locations saw the anticipated boom in young male customers, some franchises actually suffered from the ad campaign.  In the south and in other typically conservative areas the ads were not received well and many franchisees in those areas found themselves under attack rather than raking in profits.  So, though the campaigns could be construed as an overall success for the Carl’s Jr. and Hardee’s brands, a number of franchise owners saw their business decline because of them.  However, such incidents are not the rule, but rather are the exception to it.

At the heart of franchising is the root concept of taking a business model that has proven effective and distributing it so that other aspiring business owners can reproduce it.  For a franchise to be successful, it must mirror the bulk of the key aspects of the original company, or reflect the changes implemented by the franchisor across all franchises.  This requires uniformity, not just of appearance and procedure but of each franchise’s products and/or services.

To achieve a uniformity of products or services across a wide geographical range of franchises, a franchisor may place certain restrictions on franchise owners regarding acceptable sources of supplies.  This control may range from strict guidelines as to what vendors may be used, to simple guidelines regarding product quality.  There are a number of basic models employed by franchisors to ensure uniformity and any, or a combination of several types, may be used by any given franchisor.

Unrestrictive

In some instances a franchisor may completely forgo setting restrictions on what vendors or distributors its franchisees may use.  Rather, the franchisor will establish guidelines concerning the quality of product used and guidelines for the products and services provided by the franchisee.  The franchise is free to pursue its own supply sources, so long as the standards of the franchisor are upheld.  This model, however, is relatively uncommon.

Franchisor as Supplier

A slightly more common model of supply and distribution features the franchising organization playing the role of supplier and distributor for its franchises.  Though this is the most effective means of ensuring absolute uniformity across all franchises, it is really only an effective approach for relatively small franchising organizations.  Larger franchisors attempting to fill the role of supplier could quickly find that the bulk of the company’s resources are wrapped up in the supply and distribution end and the focus is taken away from franchise development.

Approved Vendors

For larger franchising organizations, the approved vendor-distributor model often works best.  This method allows a greater control of uniformity than the non-restrictive model, but does not put the burden of supply and distribution on the franchisor.  Instead, the franchisor seeks out vendors that meet the quality standards of the franchisor and franchisees are contractually obligated to obtain supplies only from these approved vendors and distributors.

Purchasing Cooperatives

Many well established franchisors may choose to allow and encourage their franchisees to establish purchasing cooperatives in conjunction with obtaining supplies from approved vendors.  As with the above mentioned model, the franchisor has final say over which vendors and distributors the franchise owners may use for obtaining supplies.  However, under this model the purchasing cooperative of franchisees bargains collectively, on behalf of franchisees, to purchase supplies in bulk.

By this method, franchisees are able to enjoy greater purchasing power and can obtain supplies at reduced prices.  Franchisees purchase their supplies directly through the cooperative, paying into the cooperative rather than to the individual vendors.  The purchasing cooperative can then oversee the distribution, or bargain for distribution via the supplier.