Saturday, 9 November 2019

Before you buy a franchise, consider the brand

You can't run a successful franchise without a strong brand. Yet many franchisees don't know this and struggle to make sales because of this very problem.

When you own a franchise or are the exclusive license holder for a brand in a particular territory, you inevitably understand the importance of marketing to drive sales, but often miss the critical role it plays in brand building. Long term, you need a strong brand to build a franchise.

It is a bit like a braai. By focusing on the core of the fire, and making sure it glows red hot, you know the rest will eventually heat up to cook the meat. Focusing on fanning the core is similar to building a brand while cooking the meat is like making sales. It can be painfully slow to wait for the fire to be ready, and the same goes for brands. Too many franchisees try and braai on a cold fire.

Your marketing activity sits in the middle, with brand building and sales activations on either side.

Brand <----- Marketing -----> Sales

Many franchisees think they inherit a brand from the onset and only need to worry about sales. While it may be true for well-established brands, such as KFC or Nandos, it often does not apply to smaller brands brought in from abroad via licensing agreements, or a Durban based business franchising out to owners in Johannesburg and Cape Town.

Over the years I've had numerous enquiries from panicked license owners realising they are stuck with a lemon. They are the proud owners of brands with zero awareness in the local market and consequently struggling sales. What must they do? Without a strong brand, your franchise, or territorial license means little. And yet it is surprising how few realise this.

As a franchisee, you should understand what you are, in reality, buying: a brand. But a brand is not a brand because it has a following overseas, or a cool logo, or a funky name or even because someone calls it a brand. A brand is only a brand when customers recognise it as one, right in your area. The customer decides if it is a brand, and if they haven't made up their mind, you are either in deep trouble or have lots of work to do.

The problem is that most franchisees are unprepared when it comes to brand building. The fact that the franchisor, or owner in another territory, provides you with brand guidelines and marketing materials does not mean that now you can tick off the brand box. You still need to do the hard work of establishing it in the minds of customers.

So what should you do as an aspiring franchisee?
  • First prize is to buy into a brand - a real brand that is recognised in your area. 
  • If you want to buy into a business with a brand that is unknown in your area, you should be prepared to do marketing-activity that grows brand awareness in addition to driving sales. This can be difficult, and I would negotiate hard with the franchisor to assist in this for a launch period.
  • If you already own a franchise that has a brand problem, I would suggest taking a couple of steps back and resetting your expectations. You need to retrofit an exciting brand position back into the marketing materials you already have. You need to work backwards from your logo towards a story.

Too many franchisors sell licenses to entrepreneurs giving them rights to open the same business elsewhere, but without the same band awareness. The result is almost always businesses that fail, or never really gaining traction - like a barbecue on a cold fire.

When you invest in a franchise license, make sure you also invest in a brand. If not, know one thing, your road to success will be twice as long.