FRANCHISEE |

4 Factors That Contribute To The Success Of A Franchise

Written by Editor

Successful franchises start off with a sustainable business model, utilizing cost savings and setting up shop at great locations to achieve a desirable level of market saturation. While a great start lays the foundation for businesses to build from, it doesn’t guarantee any continuity or success.


Related: Advantages And Disadvantages Of Franchising



1. Staying In Business

 

Franchise success is typically measured by the amount of franchise units under the system. The more franchise units there are around, the more successful the franchise will be perceived, and this translates to a more attractive franchise opportunity for prospective franchisees. But in order to do so, a sustainable business model must be in place to ensure all units under the franchise system can make an adequate profit that keeps the doors open.


2. Saving On Costs

 

Economies of scale are achieved through bulk buying of materials or equipment. The larger the order, the more franchises can negotiate a better rate with suppliers, thereby benefiting everyone in the system with lower costs of goods.


3. Being Seen By Customers 

 

As with any brick-and-mortar business, location plays a major role in connecting with the target customers. A mediocre product with a great location could out-perform a great product with a mediocre location. Franchises, having a bigger reputation and being in business longer, will provide landlords with more potential for stability and this could be a negotiating platform for exploring better locations. Established franchises could even be approached by the landlords to take up space, offering attractive rental rates.


4. Ability To Grow 

 

When a franchise has a low level of market penetration for a specific territory, there is more space for growth, meaning there is more potential for franchise units to be set up. On the other hand, when a territory is saturated with franchise units, setting up additional franchise units might lead to everyone in the territory looking at a smaller share of profits because each market has a limit to how much it can bear.

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