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Franchisors Can Benefit From SWOT Analysis

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Franchisors can gain significant benefits by using SWOT Analysis to evaluate their company.

SWOT analysis, which is an acronym for Strengths, Weaknesses, Opportunities, and Threats is a process used by companies to evaluate their position relative to a new product introduction, a strategic plan, a business venture or project. Albert Humphrey, who was affiliated with the Stanford Research Institute over 40 years ago, is considered the creator of the SWOT analysis concept. The SWOT process is a method of gauging the overall health of a company by identifying those factors that can impact current and future performance.

A SWOT analysis can be a useful tool for a franchisor. It can be an opportunity for a franchisor to evaluate and gauge their relative position in the marketplace. Although, primarily used in concert with a new product launch or major shift in strategy, the process itself is an excellent way for a company to perform a thorough self analysis.

Franchisors that use a SWOT analysis need to be prepared to ask some tough questions and gather the right answers for each of the SWOT categories (strengths, weaknesses, opportunities, and threats) in order to find their competitive advantage. In order to obtain particular information franchisees will need to be involved in various steps of the process. After all, the franchisees represent the eyes and ears of the franchisor in the marketplace.

When performing a SWOT analysis here are suggestions:

  • Strengths: When evaluating itsí strengths a franchisor needs to determine how it compares versus itsí competitors. What does the franchisor do better than other franchisors or other companies? What products or services offered by the franchisees have a certain uniqueness or value? Are the franchise and company locations properly positioned from a market standpoint? How strong are the supply channels?
  • Weaknesses: This next step can be the hardest. Namely, identifying the weaknesses of the franchise. This step requires objectivity and setting aside egos. What areas of the franchise operation need improvement? How does the franchise compare and stack up to competitive franchise operations?  How well are the franchisees performing? Is the franchise system growing? If not, why?
  • Opportunities:  Identifying the franchisorís strengths can lead to uncovering new opportunities. Is the market for the products and services growing? Can the franchise expand to new markets? If the franchise corrected some problem areas of weakness could it lead to opportunities?
  • Threats: This step in the process refers to the challenges and hurdles that the franchisor faces.  Are there new government regulations on the horizon? Are new franchisors entering the market? Are these franchises large or start-ups? Is the franchisor properly capitalized? Are there franchise relations issues? Is it difficult to expand the franchise network?

Example of a Franchisor SWOT Analysis

S  STRENGHTS

  • Multiple locations
  • Strong franchisees
  • North East USA market domination
  • Positive franchise relations

W WEAKNESSES

  • Limited brand awareness beyond North East market
  • Older locations.
  • 40% need remodels
  • Increased supply costs

O OPPORTUNITIES

  • Growing market demand
  • Introduce new menu items
  • International expansion
  • Expand franchise network

T THREATS

  • Six competitive franchise concepts introduced in past six months
  • Price competition in marketplace
  • Limited capital for expansion

A SWOT analysis is a valuable tool that franchisors can use to evaluate the performance of the franchise network and identify the critical elements of the entire franchise operation.

© 2013 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at franchiseknowhow@gmail.com

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