Selling to Franchise Organizations: An Opportunity on Every Corner. A White Paper

Transcription

1 Selling to Franchise Organizations: An Opportunity on Every Corner A White Paper 1

2 Selling to Franchise Organizations: An Opportunity on Every Corner Introduction 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. The market is made up mainly of small and medium businesses with the need to market locally. This offers print service providers the opportunity to aggregate volume, manage distributed marketing programs and sell digital printing because the market relies on customized materials produced on-demand. Definition 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. 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

3 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. 3

4 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. 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. 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 4

5 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. 5

6 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 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. Franchisors are looking for providers that offer a complete approach to managing the marketing supply chain. Web-to-print systems enable franchisors to maintain critical brand consistency, while allowing franchisees to customize pieces with special offers or images. 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. 6

7 Global Resources for Researching and Following the Franchise Market American Association of Franchisees and Dealers, Austrian Franchise Association (ÖFV), Belgian Franchise Federation (BFF), Brazilian Franchise Association (ABF), British Franchise Association (BFA), Camara Venezolana de Franquicias (CVF), Canadian Franchise Association (CFA), Chain-Store and Franchise Association (CCFA), Croatian Franchise Association (CAF/FIP), Czech Franchise Association (CAF), Danish Franchise Association (DFA), Ecuadorian Franchise Association (AEFRAN), Egyptian Franchise Development Association (EFDA), European Franchise Federation (EFF), Every Franchise, Finnish Franchising Association (FFA), Franchise Association of India (FAI), Franchise Association of New Zealand (FANZ), Franchise Association of South Africa (FASA), Franchise Bison, Argentinean Franchise Association (AAMF), Franchise Council of Australia (FCA), Franchise Opportunities, Franchise.com, Franchise-America, Franchising and Licensing Association (FLA), French Franchise Federation (FFF), German Franchise Association (DFV), Greek Franchise Association, Guatemala Franchise Association (AGF), Hong Kong Franchise Association (HKFA), Hungarian Franchise Association (HFA), Indonesian Franchise Association (AFI), International Franchise Association (IFA), International Franchise Association, Italian Franchise Association (AIF), Japanese Franchise Association (JFA), Korean Franchise Association (KFA), Lebanese Franchise Association (LFA), Malaysian Franchise Association (MFA), Mexican Franchise Association (MFA), Moroccan Franchise Association (FMF), Netherlands Franchise Association (NFV), Phillipines Franchise Association (PFA), Polish Franchise Organization (PFO), 7

8 Portuguese Franchise Association (APF), Russian Franchise Association (RARF), Slovenian Franchise Association (SFA), Swedish Franchise Association (SFF), Swiss Franchise Association (SFV), Taiwan Franchise Association (TCFA), The Franchise Doctor, The Wall Street Journal, startup.wsj.com Turkish Franchise Association (UFRAD), World Franchises, 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. 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. 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. 8

9 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 ( 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. 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. Offer to speak at franchisee training sessions or host sessions at your location on marketing and communication topics. 9

10 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 Xerox Corporation. All rights reserved. Xerox and Xerox and Design are trademarks of Xerox Corporation in the United States and/or other countries. 08/13 BR7579 T P01843