As a franchise consultant, I discuss with all NFA’s clients that providing goods and/or services to your Franchisees can be an important income stream for a Franchisor. When you franchise your business, do not overlook this profit center.
Often, prospective Franchisors concentrate on the funds generated by initial franchise fees and on-going royalty payments. For a number of franchise programs, these two areas are the primary sources of income. But there is another area that can be very lucrative for Franchisors — selling products or services to Franchisees.
Here are some examples:
- Does your restaurant have special recipe sauces, seasonings, marinades, dressings, doughs or other ingredients, that are essential to the preparation of your menu items? If so, is it feasible for the Franchisor to make any of these ingredients and sell them to your Franchisees? Think of KFC’s special blend of herbs and spices or Baskin Robbin’s ice cream. It is certainly acceptable to require your Franchisees to purchase such items from the Franchisor at a reasonable profit.
- For a retail store, can the Franchisor provide a buying service for Franchisees? This can be a tremendous service to your Franchisees, particularly if their profits are dependent on having the right merchandise mix to meet current trends. If you provide this service to your Franchisees, you can certainly improve their chances for success, and again, you are entitled to charge a fair profit.
- Many businesses require logo items to operate. These articles might be uniform apparel such as logo shirts, caps, aprons or jackets, packaging such as bags, wraps, cups, napkins, etc., or forms including business cards, invoices, marketing brochures and other printed materials. In many franchise programs, the Franchisor prints large quantities in bulk and sells them to Franchisees at a profit. Often, this type of program can save Franchisees considerable sums over printing small quantities of the necessary materials.
- When you franchise your business, are there services you can provide to your Franchisees? Many Franchisors do some or all of the work for their Franchisees. For example, in some printing franchises, the Franchisees sell printing jobs and the Franchisor actually prints them. At certain direct mail franchises, the Franchisee works with the clients, and the Franchisor prints and mails the marketing pieces. For many hotel franchises, the Franchisor handles the reservations for the individual locations. Or, the Franchisor might provide bookkeeping services for its Franchisees.
- For some restaurant franchises, the Franchisor operates a commissary that prepares all or some of the food and sells it to the Franchisees.
For any of the points mentioned above, it is accepted for the Franchisor to make a reasonable profit on the goods and services it provides its Franchisees. Many Franchisors generate very significant revenues from these products and services.
Thinking About Franchising?
NFA Franchise Consultants have the experience to help businesses franchise. Just watch and listen to some of our client case studies and video testimonials. We can HELP YOU and it doesn’t cost anything to call and talk to us!
So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form. We look forward to helping you take your business to the next level and beyond.