Five Indicators of a Successful Franchise Program
by Ed Teixeira
There are certain attributes that all successful franchise programs
share. This article presents five of the most important attributes. Whether
you’re a franchisor or an individual looking to purchase a franchise read
this article to learn about what successful franchises have in common.
Modern franchising arose in 1932, when Howard Johnson established the first
modern restaurant franchise. It was based on the successful
restaurant located in Quincy, Massachusetts and founded in the late 1920s. The
idea was to let independent operators use the same name, food, supplies, logo
and even building design in exchange for a fee.
Although franchising concepts, regulations and structure has changed in the
past eighty plus years, there are certain constants when it comes to successful
Franchisor, franchisees and prospective franchisees would be well served to
keep the following factors in mind. These are the pillars upon which a franchise
program should be built.
1. Franchisees are meeting their financial
expectations. Whether it’s a Subway or McDonalds, franchisees are earning the
financial return that they expected to. A commonly used phrase in franchising
is: “Are the franchisees making money?” The last two words should be replaced
with “meeting their financial expectations?” The key point is to determine if
the franchises are profitable.
2. The demand for purchasing the franchise is driven
by referrals not just advertising and PR. In today’s business and high tech
environment it’s possible for a franchisor to generate fast franchise growth by
dynamic advertising and extensive promotions. Recently, there have been several
examples of weak franchise programs that grew to a significant size by overly
aggressive franchise marketing. In many cases the growth was so rapid there was
no history to indicate favorable franchisee performance. This led to a lack of
proper validation. Be wary of fast track franchise growth.
3. The franchise program began with unit franchises.
If you review the leading franchise programs you’ll find that they began by
selling unit franchises before offering area development or master franchises.
Today, some franchises launch their program by selling large territories and
relying upon others to develop, train and support their new franchisees. Without
an initial foundation of unit franchises, the franchisor risks launching a
program without having gained the knowledge and experience necessary to build a
successful franchise network
4. Franchisor leadership is actively involved in the
franchise operation. Go back in franchise history and you’ll find the most
recognized franchise brands were founded and led by individuals that played an
active and highly involved role in the franchise. Fred Deluca of Subway, Ray
Kroc of McDonalds and Bill Rosenberg of Dunkin Donuts are a few examples of
franchise builders. However, there are many other individuals that have founded
and operate countless franchises with distinction. To recognize these leaders
look for these indicators; they understand the business thoroughly, they are
actively involved in meeting and evaluating franchise prospects, they are
readily accessible to franchisees, the franchise has minimal litigation and
positive franchise relations.
5. The franchise concept is operationally simple,
fills a basic customer demand and is well organized. If we review some of
today’s most successful franchises these are the common attributes they all
share. Consider a Panera Bread operation, which on the surface appears to be
fairly complex. If we look at it in greater detail we’ll find simplicity to the
operation that provides an attractive and quality product with fast service.
There are other attributes that a successful franchise program has, however
if these 5 attributes are present, chances are you’ve chosen the right
Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at