Franchising: the best of both worlds

In the battle for market share and growth, franchising plays an important role. The originally American system has become almost commonplace in our country. Franchising offers the advantages of a joint approach, while the franchisee remains fully independent.

The analysis by Pieter Koelewijn is clear and sober. "There are very few retailers left who can operate completely independently and still realize an attractive margin. That makes sense: as an entrepreneur, you can't focus on primary matters like an attractive assortment, good store layout, service, and customer contact, as well as secondary matters like marketing and advertising, good administration, proper logistics, and good personnel policy. That has nothing to do with a lack of entrepreneurship. It's simply a matter of available time and capacity. Every hour you spend on, for instance, purchasing, you cannot spend on advertising or customer contact. Apart from that: there are no jacks-of-all-trades who are experts in all the areas needed today to run a store profitably."

Franchise

"Franchise is a model where franchisor and franchisee work together harmoniously," he continues. "A franchise organization benefits if a franchisee performs well, because then the franchise revenues are simply larger. Moreover, it is easier for an organization to expand a certain formula through a franchise. A large part of the necessary investments is made by the franchisee. Furthermore, it turns out that the results of franchisees in terms of turnover and profit are considerably better than those of company-owned locations with a branch manager. That is also logical. As a franchisee, you remain an independent entrepreneur, and every extra step you take is immediately noticeable in your results. A branch manager is often only partially dependent on the realized turnover for their salary."

Koelewijn identifies the key word nowadays as turnover speed. This concept determines the difference between failure or success. "In the past, you could afford to have a range of products on the shelf of which maybe only two were sold per year. With today's fierce competition, that is no longer possible. To achieve a decent margin, you must have a good combination of an attractive, current assortment and a competitive selling price as an entrepreneur. Franchise is not a cure-all. There are also purchasing combinations you can join as an independent entrepreneur. The essential thing is that you must have enough purchasing volume to get a competitive purchase price from your supplier. As an independent entrepreneur, you can't achieve that."

Collaboration - lower costs

Pieter Koelewijn almost casually lists the benefits of a good franchise organization. "A brand provides recognition and reliability. If you open a McDonald’s next to the highway, you simply know your turnover is a multiple of what it would be if you opened a roadside restaurant with the same offerings without the famous ‘M’. You benefit from the brand awareness. Additionally, a franchise organization, if well-managed, has already proven the value of the concept. You don’t have to worry about assortment, purchasing, prices, store layout, administrative systems, and flyers. The franchise organization takes that burden off your shoulders. The time that remains can be spent on entrepreneurship: you can focus on customers, on new revenue opportunities. In short, the aspects that make it appealing to become an independent entrepreneur.

Of course, there is a price tag in the form of a franchise fee. It can sometimes be substantial. But it's typically Dutch to consider that as extra costs. I see it as a form of outsourcing tasks. You should look at the end result: does it provide something extra in the end. Franchisees often perform better than non-collaborative entrepreneurs because they benefit from collaboration in areas like purchasing, marketing, and so on. By doing it together, costs are lower. Franchise offers the advantage of scale, but you remain an independent entrepreneur. In fact, you have the best of both worlds.”