case study franchise business

Case Studies: Successful Franchise Businesses and Their Strategies

Definition of a franchise business.

A franchise business is a type of business arrangement where the owner of a trademark, brand, or business model (the franchisor) grants permission to another individual or entity (the franchisee) to operate a business using the franchisor’s established brand and systems. The franchisee pays a fee or royalty to the franchisor in exchange for the right to use the franchisor’s brand and receive ongoing support and training. This business model offers several advantages, including the ability to leverage a well-known brand, access to established systems and processes, and ongoing support from the franchisor. Successful franchise businesses are built on strong relationships between the franchisor and franchisee, as well as a commitment to following the franchisor’s proven business model.

Importance of franchise businesses

Franchise businesses play a crucial role in the economy, offering entrepreneurs the opportunity to start their own business with the support and guidance of an established brand. One of the key benefits of franchise businesses is the proven success of their business models, which have been tested and refined over time. By joining a franchise, entrepreneurs can tap into a wealth of knowledge and experience, increasing their chances of success. Additionally, franchise businesses contribute to job creation and economic growth, as they often require local employees and invest in the communities they operate in. Overall, franchise businesses are an important component of the business landscape, providing aspiring entrepreneurs with a path to business ownership and contributing to the overall prosperity of the economy.

Types of franchise businesses

There are various types of franchise businesses that have achieved success through their unique strategies. One type of franchise business is the fast food industry, where popular chains like McDonald’s and Subway have dominated the market. These franchises have capitalized on the convenience and affordability of their products, attracting a large customer base. Another type of franchise business is in the retail sector, with companies like Starbucks and The Body Shop offering a consistent brand experience across multiple locations. These franchises have focused on creating a strong brand identity and providing high-quality products. Additionally, there are service-based franchise businesses such as cleaning services or fitness centers, which offer specialized services to meet the needs of their target market. Overall, the success of franchise businesses can be attributed to their ability to adapt to changing consumer demands, maintain consistency, and provide value to their customers.

Case Study 1: McDonald’s

History and background

The history and background of successful franchise businesses provide valuable insights into their strategies for success. Understanding how these businesses have evolved over time can shed light on the factors that have contributed to their achievements. By examining their origins, growth, and adaptation to changing market conditions, we can gain a deeper understanding of the key decisions and actions that have propelled them to success. This knowledge can be invaluable for aspiring entrepreneurs and business owners looking to learn from the experiences of others and apply these lessons to their own ventures.

Franchise model and expansion strategy

The franchise model and expansion strategy play a crucial role in the success of franchise businesses. The franchise model allows entrepreneurs to replicate a proven business concept and benefit from the established brand, systems, and support. This model provides a win-win situation for both the franchisor and the franchisee, as the franchisor can expand their business without the need for significant capital investment, while the franchisee gains access to a successful business model and ongoing support. To ensure successful expansion, franchise businesses often adopt a strategic approach, carefully selecting target markets, conducting thorough market research, and implementing effective marketing and advertising campaigns. By leveraging the franchise model and implementing a well-defined expansion strategy, successful franchise businesses have been able to achieve rapid growth and establish a strong presence in various markets.

Marketing and branding

Marketing and branding play a crucial role in the success of franchise businesses. With the ever-increasing competition in the market, it is essential for franchise owners to develop effective marketing strategies to attract customers and build brand recognition. By leveraging various marketing channels such as social media, email marketing, and traditional advertising, franchise businesses can reach a wider audience and create a strong brand presence. Additionally, maintaining consistent branding across all franchise locations helps to establish a sense of trust and familiarity among customers. Successful franchise businesses understand the importance of investing in marketing and branding efforts to differentiate themselves from competitors and stay ahead in the market.

Case Study 2: Subway

Franchise structure and support

Franchise structure and support play a crucial role in the success of franchise businesses. A well-designed franchise structure ensures consistency and uniformity across all locations, allowing customers to have a similar experience no matter where they visit. Additionally, a strong support system provided by the franchisor helps franchisees navigate challenges and make informed business decisions. This support can include training programs, marketing assistance, and ongoing guidance. By providing a solid franchise structure and robust support, successful franchise businesses are able to establish a strong brand presence and drive growth in their respective industries.

Menu innovation and customization

Menu innovation and customization are key factors that have contributed to the success of many franchise businesses. By constantly introducing new and exciting menu items, franchises are able to attract and retain customers who are looking for unique and delicious dining experiences. Additionally, offering customization options allows customers to personalize their meals to their specific preferences, further enhancing their overall dining experience. This focus on menu innovation and customization not only sets franchise businesses apart from their competitors but also creates a sense of excitement and anticipation among customers, keeping them coming back for more.

International expansion

International expansion is a crucial step for successful franchise businesses looking to grow and reach new markets. It involves expanding operations beyond the domestic market and venturing into international territories. This strategic move allows franchise businesses to tap into new customer bases, increase brand recognition globally, and potentially generate higher revenue. However, international expansion also comes with its challenges, such as adapting to different cultures, navigating legal and regulatory frameworks, and understanding local market dynamics. Franchise businesses that have successfully expanded internationally have implemented comprehensive strategies, including market research, localization of products or services, and building strong partnerships with local investors or franchisees. These strategies ensure a smooth transition into new markets and maximize the chances of success for franchise businesses seeking international growth.

Case Study 3: Starbucks

Starbucks’ unique franchise model

Starbucks’ unique franchise model has been a key factor in the company’s success. Unlike traditional franchise models, where the franchisee owns and operates the individual stores, Starbucks operates its own stores while partnering with local entrepreneurs to license the brand and sell its products. This approach allows Starbucks to maintain consistent quality and customer experience across all locations, while also benefiting from the local knowledge and expertise of its franchise partners. By combining the global brand recognition of Starbucks with the entrepreneurial spirit of local business owners, this unique franchise model has proven to be a winning formula for the company.

Focus on customer experience

In the highly competitive world of franchise businesses, one key factor that sets successful companies apart is their focus on customer experience. These businesses understand that satisfied customers are not only more likely to become repeat customers, but also to spread positive word-of-mouth recommendations. To achieve this, successful franchise businesses invest in training their employees to provide exceptional customer service, create welcoming and inviting store environments, and offer personalized experiences. By prioritizing the customer experience, these businesses are able to build strong relationships with their customers and foster loyalty, ultimately contributing to their long-term success.

Social responsibility and sustainability

Social responsibility and sustainability are crucial aspects of successful franchise businesses. These businesses understand the importance of giving back to the communities they operate in and minimizing their environmental impact. By implementing sustainable practices and supporting social causes, franchise businesses can enhance their reputation and attract socially-conscious customers. Moreover, social responsibility and sustainability initiatives can also lead to cost savings and operational efficiencies, making franchise businesses more financially sustainable in the long run. Overall, integrating social responsibility and sustainability into their operations is not only the right thing to do but also a strategic move for franchise businesses to thrive in today’s socially and environmentally conscious market.

Case Study 4: KFC

Global presence and market dominance

Global presence and market dominance are key factors that contribute to the success of franchise businesses. By expanding their operations across multiple countries, these businesses are able to tap into new markets and reach a larger customer base. This global expansion also allows them to leverage economies of scale and negotiate better deals with suppliers, resulting in cost savings and increased profitability. In addition, a strong global presence helps franchise businesses establish themselves as industry leaders and gain a competitive edge over local competitors. With their extensive network of franchises, these businesses can quickly adapt to changing market trends and consumer preferences, ensuring their continued growth and success in the global marketplace.

Franchisee training and support

Franchisee training and support is a crucial aspect of running a successful franchise business. It ensures that franchisees have the necessary knowledge and skills to effectively operate their businesses and maintain the brand’s standards. Training programs are designed to cover various areas such as operations, marketing, customer service, and financial management. Additionally, ongoing support from the franchisor provides guidance and assistance to franchisees, helping them overcome challenges and maximize their potential for success. By investing in comprehensive training and continuous support, franchise businesses can empower their franchisees to thrive in the competitive market and contribute to the overall growth and success of the brand.

Menu localization and adaptation

Menu localization and adaptation is a crucial aspect for successful franchise businesses. In order to cater to the preferences and tastes of the local market, franchisees often need to adapt their menus to include region-specific dishes and flavors. This process involves conducting market research to understand the local food culture and identifying popular dishes that can be incorporated into the menu. Additionally, franchisees may also need to consider dietary restrictions and preferences of the local population. By effectively localizing and adapting their menus, franchise businesses can attract a larger customer base and establish a strong presence in the market.

Key takeaways from successful franchise businesses

Successful franchise businesses have several key takeaways that can be beneficial for aspiring entrepreneurs. Firstly, these businesses prioritize strong brand identity and consistency across all franchise locations. This allows customers to trust and recognize the brand, leading to increased customer loyalty and repeat business. Secondly, successful franchise businesses have effective training and support systems in place for franchisees. This ensures that franchisees have the necessary skills and knowledge to run the business successfully. Additionally, these businesses often have a proven business model and marketing strategies that have been refined over time. This reduces the risk for franchisees and increases the likelihood of success. Lastly, successful franchise businesses have a strong network and community of franchisees, allowing for collaboration, sharing of best practices, and mutual support. Overall, the key takeaways from successful franchise businesses highlight the importance of brand identity, training and support, proven business models, and a strong franchisee network.

Future trends in the franchise industry

The franchise industry is constantly evolving, and there are several future trends that are expected to shape the industry in the coming years. One of the key trends is the rise of technology in franchise businesses. With advancements in artificial intelligence, automation, and digital marketing, franchise businesses are finding new ways to streamline operations, enhance customer experiences, and drive growth. Another trend is the focus on sustainability and eco-friendly practices. As consumers become more conscious about the environment, franchise businesses are adopting sustainable practices to attract and retain customers. Additionally, there is a growing trend towards niche and specialized franchises. With consumers seeking unique and personalized experiences, niche franchises that cater to specific interests and demographics are gaining popularity. Overall, the future of the franchise industry looks promising, with technology, sustainability, and specialization playing a crucial role in shaping its direction.

Importance of strategic planning and innovation

Strategic planning and innovation play a crucial role in the success of franchise businesses. With the ever-changing market dynamics and the increasing competition, it has become essential for franchisors to develop effective strategies that can help them stay ahead of the curve. By carefully analyzing market trends and consumer preferences, franchise businesses can identify new growth opportunities and make informed decisions. Additionally, innovation is key to staying relevant in today’s fast-paced business environment. Franchise businesses that embrace innovation can differentiate themselves from competitors and attract a larger customer base. Therefore, a strong focus on strategic planning and innovation is imperative for franchise businesses to thrive and achieve long-term success.

Subway Case Study - Analyzing the Growth of the Popular American Fast Food Franchise

Vibhavari Madki , Indumathi B

Probably the only growing food company with over 44,000 restaurants spread out in over 111 countries is Subway and it is also one of the fastest-growing franchises in the world. Subway , a food chain specializing in submarine sandwiches. It became the largest fast-food chain in the US in 2002.

About Subway

The founder of Subway, Fred DeLuca was out to fulfill his dream of becoming a medical doctor. He was in the need of money and searched if someone could help pay for his education, a family friend suggested he should open up a submarine sandwich shop. Dr. Peter Buck, Ph.D. in Physics, lent him a loan of $1,000 to become DeLuca's business partner. They opened up a restaurant called Pete’s Super Submarines as submarine sandwiches were the only specialty. They even planned and set a goal of opening 32 stores in just 10 years.

History of Subway

The story of Subway started in 1965 when Fred DeLuca borrowed $1,000 from Peter Buck and opened his first restaurant in Bridgeport, Connecticut. In a passage of one year, they formed another company to oversee the expansion of their restaurant named Doctor’s Associates, a name derived from DeLuca’s desire to make enough from the restaurant to fund his medical tuition. Over the course of time, the two changed the name of their restaurant chain to Subway in 1968. The Headquarters are in Milford, Connecticut .

After Subway's establishment, it didn’t take much time for it to grow and anticipate incredible success. The first Subway was opened in California in 1978, and by the year 1984, it went international by opening up a franchise in Bahrain.

Fred served as the company’s CEO till 2015 . He suffered from an illness for two years, DeLuca finally turned his position over to a person called Suzanne Greco before passing away a few months later. Despite the death of the founder of Subway, it continued to see unprecedented success.

There are 26,744 Subway locations in the US and it actually surpasses the number of McDonald’s locations in the country, making Subway having the leading number of restaurants in the United States. Since then from 2007, Subway has continued to rank high in Entrepreneur’s Top 500 Franchises list.

The Subway Logo

The popularity of the Subway logo is majorly high because of the logo’s staying power and consistency. Unlike many companies who are unfaithful to the logos they started out with and changed it completely, Subway’s logo has remained mostly the same from the very start.

Subway had created a monogram out of those arrows present in the logo and continues to use that in much of the marketing material. The Subway logo represents the entry and exit of Subway. Customers can see the monogram everywhere from Subway’s commercials to the paper in which they wrap their sandwiches.

Altogether, it has managed to establish a widely recognizable logo that conveys all of the messages to its customers. Subway has managed to get it right, which says they have put a lot of thought and effort into the logo so they are able to keep it throughout the lifetime of the company.

Amazing facts about Subway

After opening the food chain, Pete sold just over 310 submarine sandwiches and charged no more than 70 cents for them.
Rather than going with a less time-consuming process of machine-picking the black olives that other brands use, Subway hand-picks every single black olive to use in their sandwich,
The yummy 6-inch, lunchtime classic was initially called the Snak when it was added to the massive menu in 1977.
There is a combined total of 4,500 Subway stores across the globe. It had stores in over 110 countries in 2017, with the most stores being in the U.K. and Brazil.
Every Subway store uses on an average 16 acres of the leafy green lettuce that we love in our sandwiches every year.
An American decided to rob a Subway store and then thought to best use the stolen money was to buy a Potbelly sandwich at the same place. Later, he was arrested.
According to a former employee, when it comes to the customer's choice of filling, the meatballs or roast beef are the worst items you could pick due to the amount of time they have been laying around.
During the construction of the first World Trade Center, a Subway store decided to open up a store elevated high above the New York Skyline to feed hungry construction workers.

Number of Subway Stores around the globe

Growth of Subway

Over the years, Subway had struggled to maintain its position in the sandwich arena and retain its establishment in the food market.

In 1974, Subway had started its business through a franchise business model. Exact eight years later, the company with a lot of developments and experience had grown from 16 stores up to 200 stores. Later by 1990 Subway was at around 5,144 locations, with a goal to reach 8,000 stores by 1995. Growing faith of customers in Subway strengthened the company to reach 10,000 stores by 1995.

Subway competed with McDonald's and surpassed it in the year 2002, becoming the highest number of outlets. In the year 2013, there was an annual revenue of $9 billion from the outlets around the countries. Apparently, the Subway brand has more than 44800 outlets now in more than 114 countries.

Subway in India

After the initial introduction and evolution of this food chain, the focus shifts on India operations. Indian market is a large, younger population that has a high liking towards anything that is 'made in foreign' which symbolizes being modern.

Subway is strengthening its delivery network in India by partnering with prominent food aggregators. They are also looking forward to facilitating the customer and introducing mobile ordering for the Indian market.

The popular American restaurant chain, Subway, which has successfully let itself spread across the globe, is also making its place in India. Global sandwich restaurant, food chain Subway has launched its 600th franchise restaurant in India at Bharuch, Gujarat.

The Subway franchise is easy and cheap to set up in a country like India and there is a huge number of Subway stores too. Currently, the American food chain has about 660 restaurants in India, which is the eighth largest market for it in terms of the number of restaurants globally.

Subway's Indian subsidiary is to be acquired by Reliance Retail, as of August 4, 2021. The company reportedly holds the third-largest share with 6% of the Indian QSR market that is valued presently at Rs 18,800 crore, with Domino’s and McDonald’s, being the current market leaders with 21% and 11% shares respectively. Mukesh Ambani-led Reliance Industries Limited is looking like it is on an acquisition spree. The company now seems to target the QSR market after tapping in on several sectors including grocery, e-pharmacy, edtech, music, furnishings, and more. The acquisition deal of Subway India is alleged to be within $200-250 million.

The Bottom Line

Subway is a delicious combination of fresh and healthy menu items, which includes sandwiches and other bakery products, with the speed and convenience of fast food. The restaurant chain Subway has exploded into an international success, and its Indian subsidiary had also been quite revered across the nation. However, the current acquisition deal with Reliance Retail might be putting a stop to the search of Subway Inc for collaboration with a single partner for expanding the business operations but the deal might also usher a bright future ahead.

How many subways are there in India?

As of now, there were 660 Subway restaurants in India.

Who is the CEO of Subway?

John Chidsey, since Nov 2019.

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10 Brilliant Franchise Examples to Learn From (in 2022)

What exactly is franchising, and what are some of the best franchise examples that we can learn about from a Business and Marketing perspective? Keep on reading to find out!

While the boom in franchising didn’t take place until after World War II, the foundations of modern franchising can be dated back to the Middle Ages.

Around the 16th century, land owners used to make franchise-like agreements with tax collectors, who retained a percentage of the profits they collected, turning the rest over. And although this practice ended at the end of the century, it continued spreading to other endeavours.

What is a franchise model?

Today, the franchising system is a business model that constitutes an agreement between a business owner (the franchisor) and a third-party (the franchisee).

This agreement allows the franchisee to manage and operate the owner’s products and services using their trademark, branding, and business model – in return for a fee and ongoing royalty payments.

In other words, a franchise essentially acts as an individual branch of the main franchise company.

Of course, there are different types of franchise business models and ownerships, but this is the general concept behind this system, and everything that you need to know at the moment to understand its basics.

The reason why is because I believe that the best way to understand a concept is to look at practical, real-world cases. And that’s why today, we will focus on discussing different franchise examples.

What are the benefits of franchising?

Before we move on to our franchise examples, let’s take a quick, but deeper look at the concept of franchising as a business model. What are its main benefits and advantages ?

Here are some of the biggest reasons why many people choose this model to start their own business:

One of the most important advantages of franchising is the right to use an already established trademark . As a franchisee, you are allowed to trade with the name, logo, style, and brand colours of a company that’s already built a name for itself.

This is especially important if you have chosen a reputable company that has achieved a certain level of brand awareness. On the contrary, if you have to start a completely new and independent business, you will have to build that reputation and brand recognition completely from scratch.

Support and Training

Another benefit of working with this business model is that you can usually expect an ongoing support and training from the franchisor. This means that they will guide you into the right way to begin developing your business, which increases your chances of succeeding.

In many cases, this support includes administrative and managerial services, as well as Marketing materials and resources.

The next benefit of operating a franchise business is that you have a lower risk for failing compared to a newly-established company. Generally, franchises tend to be a more secure investment because they use models that have already been tested (and have succeeded).

Additionally, banks are more likely to approve a loan for a franchise with a credible reputation other than for starting an independent business.

Brand recognition

One of the hardest parts that comes with the process of starting your own business is gaining a loyal customer base, and increasing your brand recognition . It takes a lot of time, money, effort, and the right Marketing strategy.

However, when you buy a franchise, you basically bypass a lot of the work that goes into Marketing, advertising, and branding. So, you not only jumpstart the process of getting your business up and running, but you save a lot of money, too.

And now that we have cleared out some of the most important benefits, let’s jump right into our franchise examples!

10 brilliant franchise examples

As I already mentioned, I think that one of the best ways to understand a concept is to see some real life examples and practical cases. So, without wasting more time, let’s go:

1. McDonald’s

First on our list of franchise examples, and probably one of the most famous ones, is McDonald’s.

The leading fast food company has been franchising since 1955 as a predominant way of doing business. In fact, out of the 38,695 restaurants that McDonald’s has worldwide, 36,059 are operated by franchisees , and only 2,636 by the company itself.

This means that the company owns just 6% of its restaurants!

Some requirements to open a McDonald’s franchise include:

An initial down payment of minimum $500,000 in liquid cash;
A franchise fee of about $45,000 ;
A good credit history ;
Significant business experience ;
The ability to develop and execute a busines plan ;

The total initial investment for opening a McDonald’s varies between $1 million and $2.2 million, which will also depend on whether you are opening a new restaurant, or purchasing an existing one.

Considering the strict criteria and significant investment that the company requires from its franchisees, why is there so much demand for it ?

The main reason why is McDonald’s turnover. The company has profit margins of approximately 20% , which is quite impressive considering that the average profit margin for big companies in the S&P 500 index is just about 8.7%.

In fact, the average profit margins for the restaurant industry are just 2.4% . So, how is McDonald’s able to achieve these margins? The main reason why is because the food is really cheap – even cheaper than you would think.

The company has an incredible operational efficiency compared to other brands in the industry. For example, a cheesburger costs just 0.39 cents to make ! You can check McDonald’s actual expenses on every product here.

2. Marriott International

marriott international - franchise examples

Next on our list of franchise examples is the American hospitality company Marriott International.

Founded in 1927, Marriott is the largest hotel chain in the world by number of available rooms. More specifically – 1,400,693 rooms from 30 different brands with 7,848 properties across 131 countries. I can’t even process that many numbers!

Anyways, back to our point.

According to franchisegrade.com , which offers franchises to operate brands such as Marriott Hotels, JW Marriott Hotels, Marriott Resorts, and other ones from the company’s wide portfolio, you can expect the following costs if you want to open a Marriott franchise:

An initial franchise fee of up to $120,000 ;
Working Capital: $3,900 to $5,400
A royalty fee of approximately 9% ;
And a total estimated investment between $70k and $150k;

When it comes to return on investment for this company, MacroTrends cites a ROI of 12.75% by March 2020, a percentage that dropped significantly once the global coronavirus pandemic hit the world. Post-COVID, Marriott’s ROI reduced to just 7.89% in the matter of months.

3. Century 21

Our list of franchise examples continues with Century 21 , a real estate agent franchise company that was founded in the USA back in 1971.

Today, it is present across 80 countries and territories, with over 9,400 independently owned franchise brokers, and a total number of 127,000 employees.

Here are some of the requirements that you will have to meet if you want to open a Century 21 franchise:

Adequate capitalization – the company requires that you have a minimum net worth of $100,000;
Market availability – additionally, you will have to ensure that there are available markets in your location;
Franchise fee – as a part of the initial investment, you will have to pay a franchise fee of up to up to $25,000;
Royalty fees – besides from the initial franchise fee, you can also a 6% ongoing royalty fee, and a 1.5% of ad royalty fee;

To sum it up, you can expect a total investment between $24,000 and $450,000 depending on different factors such as market location, permits, licenses, deposts, and other factors.

As a part of the franchising system, the franchisee receives a complete training, support packages, guidance for the success of the business, a press release and marketing materials, among other benefits.

Going back to the fast food restaurant for a minute, next on our list of franchise examples is Subway. The company is known as being one of the fastest growing franchises in the world – by October 2019, it registered 41,512 locations across 100 countries.

On top of that, it is the second biggest fast food advertiser in the United States right after McDonald’s.

Some of the requirements to open a Subway franchise include:

A minimum net worth of $80,000 and at least $30,000 in liquid assets;
Initial franchise fee of $15,000 – among the cheapest franchise fees;
A weekly fee of 12.5% of the company’s total sales;
Of which 8% are for ongoing royalty fees, and 4.5% for ad royaly fees;

To sum it up, a total initial investment for the franchise is estimated to be anywhere between $116,000 and $263,000. Which, when it comes to franchisable restaurants, is one of the most affordable options available on the market.

In comparison, we already saw previously that an initial investment for McDonalds starts from $1 million.

Changing the sector for our franchise examples, next on our list is Hertz – a leading car rental company that operates 10,200 corporate and franchisee locations across the globe.

It is also the second largest US car rental business by locations, sales and fleet size, operating in more than 150 countries internationally. In 2019, Hertz had almost 535,000 vehicles in its fleet!

Some of the requirements to open a Hertz franchise include:

An initial franchise fee between $25,000 and $55,000 ;
A net worth of over $500,000, and $150,000 in liquid capital;
A monthly fee of 10% for ongoing royalties and advertising;
Preferred experience in the travel or automotive industry ;
Market availability for the specific location desired by the franchisee;

Considering the higher costs associated with the business, including the supply of vehicles that meet the company’s requirements, you can expect to pay a total investment between $318,295 and $4,059,000.

The company also provides an ongoing support for its franchisees. It includes access to major supplier programs for the purchase of vehicles, comprehensive training and workshops, point-of-sale computer integration with the Hertz Reservations System, and more.

6. Carrefour

Sixth on our list of franchise examples is the French supermarket chain and international corporation Carrefour. Founded in 1959, the company is now Europe’s largest supermarket chain , generating over €86.3 billion in sales across its 12,225 locations.

To open a Carrefour freanchise, you will need to meet the following requirements:

Experience in management , ideally gained in the distribution sector;
A desire to become an independent enrepreneur and business owner;
Excellent interpersonal, organizational, and customer service skills;
High availability and geographical mobility ;
An initial investment between $95,000 and $295,000;

The franchise agreement is usually signed for a duration of 7 years, and it is automatically renewable.

Additionally, franchisees receive training and assitance by the company. This includes management training programs, merchandising, and even a training center dedicated exclusively to the franchise world.

7. Circle K

Our list of franchise examples continues with Circle K, Canada’s largest convenience store chain with a total number of 15,000 locations mainly across the USA, Canada and Europe. More than 2,380 stores are operating under franchise agreement worldwide.

If you want to open a Circle K franchise, you will need to:

Possess an entrepreneurial spirit;
Pay an initial franchise fee of up to $25,000 ;
Have a net worth of at least $500,000 ;
And also have about $100,000 in liquid cash;

Additionally, you will have to pay an ongoing royalty fee between 3% and 7.5%, and an ad royalty fee of 1.5%. The total investment, depending on factors such as location, construction, remodeling, furniture and merchandise inventory, ranges between $185,000 and $1,600,000.

The company’s franchise program ensures that every franchisee gets proper training to lead their store successfully, and provides additional support in terms of marketing, merchandising, and promotion.

Kumon Educational Japan Co. Ltd. is a Japanese educational network created by the mathematics educator Toru Kumon. It is designed around Kumon’s method of teaching mathematics and reading, and it is focused primarily on young students.

As of 2020, the company has over 24,00 franchises outside of the US, 1,565 franchises within the US, and 27 company-owned centers.

Here is what you need to know about franchising a Kumon center:

There is no need for specific experience or background in the educational sector;
However, you will need to have a net worth of $150,000, and liquid capital of $70,000 ;
An initial franchising fee of just $1,000 , which is significantly less than other franchisors;
You also need to have a passion for working with children, and a Bachelor’s degree.

Apart from ongoing support, assistance, and training, the company also covers up to $36,000 in different expenses, including 50% of the center’s rent for the first 12 months, a delivery of Kumon’s furtniture and fixture, and a 50% reimbursement on the initial Marketing expenses.

The total investment range varies anywhere between $73,000 and $154,000.

9. The UPS Store

Next on our list of franchise examples is The UPS store , the world’s largest franchisor in the sector of retail shipping, postal, printing, and business service centers.

As of 2020, there are more than 5,000 independently owned locations across the United States, Puerto Rico and Canada. The company is also a wholly owned subsidiary of UPS (United Parcel Service).

Some of the numbers that you will have to take into account if you want to open a franchise of The UPS store include:

A net worth of $150,000;
A liquid cash requirement in the range of $60,000 – $100,000 ;
An initial franchise fee of $29,950 ;
8.5% in ongoing royalty fees, and 2.5% for ad royalties;

The total investment for the franchise will vary depending on the location, size, and the type of center that you are looking for as a franchisee.

For example, traditional locations cost between $137,000 – $566,000 while the range for rural locations is between $133,000 – $378,000. You can also opt for the so-called Store-in-Store location, which is a freestanding The UPS Store set up in another business.

The total investment for Store-in-Store locations is between $65,000 and $285,000 .

10. Dunkin’

Dunkin’, also known as Dunkin’ Donuts , is undoubtedly one of the world’s most beloved doughnut companies, and one of our “sweetest” franchise examples. (It is obvious that I am currently craving a doughnut, right?)

Anyways, back to our facts. With almost 13,000 locations across 42 countries, Dunkin’ is also one of the largest coffee and donut shop chains in the whole world. It is also a huge franchisor – in fact, all 13,000 stores are franchisee owned and operated.

There is not a single company owned store!

Some of the requirements to open a Dunkin’ franchise include:

A net worth requirement of $500,000 minimum;
An initial franchise fee of up to $90,000;
Over $250,000 in liquid cash;
An ongoing royalty fee of 5.9% ;
And an ad royalty fee varying from 2% to 6%;

Compared to other franchisors such as Subway, Dunkin’ requires a much bigger total investment. However, it is still lower compared to McDonald’s and Dunkin’s main competitor Krispy Creme, the initial investment of which can reach up to $1.9 million.

When it comes to return on investment, the annual sales of a Dunkin’s location range from approximately $620,000 to $1.3 million, depending on the type, size, and location of the franchise.

With an average Dunkin the doing about $1 million in annual sales, you can expect a net operating income of about $100,000 after paying out all expenses.

And that was all from me for today, folks! Thank you for taking the time to read my article on franchise examples, and I hope I will see you in my next post! Until then, do not hesitate to leave me any doubts or questions in the comments below. It would also make me really happy if you susbcribe to my blog – I promise that I don’t spam!

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My expertise covers areas such as Google Ads, Google Analytics, Search Engine Optimization, Content Marketing, and Social Media.

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5 Franchise Marketing Case Studies That Will Totally Blow Your Mind

Sep 10, 2023

You won't believe the transformations that the right strategies can bring to franchise marketing. We're talking game-changing, sky's-the-limit kind of growth here, folks!

But don't just take my word for it. Real-world case studies offer some of the most invaluable insights you could ever hope for when it comes to effective digital marketing for franchises .

That's why today, we're digging deep into five franchise marketing case studies that will absolutely blow your mind. We're pulling back the curtain on the strategies that have catapulted these franchises to the top of their game.

So buckle up because this is your roadmap to skyrocketing your franchise to unimaginable success.

Case Study #1: The Social Media Savior

Remember when Domino's Pizza was primarily associated with late-night college study sessions and quick but not-so-tasty slices? A little over a decade ago, the franchise faced a PR nightmare, with plummeting sales and an awful reputation for food quality.

They needed a game-changing strategy to turn things around, and that's precisely what they did through the savvy use of social media.

Challenges Faced:

Poor food reputation
Falling sales
Negative customer reviews

Strategy Implemented: Leveraging Social Media

Domino's embraced transparency like never before. They listened to the customer feedback and criticism and decided to share their journey to improve via social media. They created a campaign where they publicly acknowledged their shortcomings and what they were doing to improve.

The 'Oh Yes We Did' campaign was revolutionary then, providing an inside look at their steps to enhance food quality.

Results and Takeaways:

The outcome was nothing short of incredible. Domino's sales skyrocketed, its stock price went through the roof, and its brand perception flipped from negative to overwhelmingly positive. Talk about a 180-degree turnaround!

So, what's the takeaway here for digital marketing for franchises? Never underestimate the power of social media to connect, build trust, and transform your brand image.

RELATED: Building a Global Brand Name Like Queen Elizabeth II

Domino's didn't just improve their product; they mastered the art of storytelling and public relations through social platforms, which paid off big time.

Case Study #2: The SEO Surge

Ever heard of Orangetheory Fitness ? This fitness franchise struggled to make its mark in a highly competitive market a few years back. Local gyms and big-name fitness centers were overshadowing them, and they weren't showing up in online searches where it mattered most.

Low online visibility
Tough competition from both local gyms and large chains
Difficulty attracting new memberships

Strategy Implemented: Aggressive SEO Tactics 

Orangetheory decided to go all-in on an aggressive SEO strategy . They optimized their website for local searches, used long-tail keywords related to fitness and well-being, and created high-quality backlinks to improve their site's authority.

They even localized their SEO strategy to appear in "near me" searches for different franchise locations.

The outcome was an SEO masterstroke. Orangetheory started ranking on the first page of Google for key search terms and saw a significant uptick in organic traffic. This led to an increase in memberships and solidified their position in the competitive fitness market.

The lesson here in the context of digital marketing for franchises? Never underestimate the power of a well-executed SEO strategy.

By tailoring SEO to local markets while maintaining brand consistency, Orangetheory boosted its visibility and bottom line.

Case Study #3: The Content Kingpin

Take Subway , the fast-food sandwich chain. A few years back, Subway was dealing with a tarnished reputation due to various controversies, and it desperately needed a way to rebuild its image and customer trust.

Damaged brand reputation
Declining customer engagement
Increased competition in the fast-food sector

Strategy Implemented: Content Marketing

Subway decided to change the narrative by turning to content marketing. They focused on producing high-quality blog posts, videos, and infographics centered around healthy eating, lifestyle choices, and the quality of their ingredients. This wasn't just generic content but tailored to resonate with their specific customer base.

RELATED: The Ultimate Guide To Content Marketing

The content campaign was a hit. It increased customer engagement, improved brand perception, and even boosted sales. It also created a space for Subway to interact directly with customers, addressing concerns and building relationships.

The takeaway for digital marketing for franchises? Content is indeed king. Through effective content marketing, Subway rebuilt its brand image and connected with its customer base in a way other marketing strategies couldn't achieve.

Case Study #4: The PPC Prodigy

Ever heard of ServiceMaster Clean ? They're a franchise that specializes in cleaning and restoration services. A few years ago, they faced a unique challenge: While they had widespread brand recognition, they struggled to translate this into online leads and sales.

Lack of online visibility
Low conversion rates
Struggling to compete against local independent providers

Strategy Implemented: Pay-Per-Click Advertising

To address these issues, ServiceMaster Clean pulled a strategic move—they invested heavily in Pay-Per-Click (PPC) advertising . Using highly targeted keywords related to cleaning and restoration, they could display their ads to a particular audience actively searching for these services.

The results? A substantial increase in online leads, a higher conversion rate, and a much-improved ROI. In short, their PPC campaign was a resounding success. This elevated the franchise's online presence and proved that PPC can offer immediate returns when executed correctly.

So, what's the big takeaway regarding digital marketing for franchises? PPC isn't just for the big players; it's a scalable strategy that can deliver for franchises of all sizes.

Stay tuned as we reveal our final mind-blowing case study showcasing a multifaceted digital marketing approach. You won't want to miss this!

Case Study #5: The Email Maestro

Meet Dunkin' Donuts , a franchise that needs a little introduction. Although they're a giant in the fast-food industry, they, too, have challenges to conquer. One of those was customer retention, especially during off-peak seasons.

Customer retention during low-traffic periods
Stagnant email engagement rates
Competition from local cafes and large coffee chains

Strategy Implemented: Email Marketing

Dunkin' Donuts went full throttle with a segmented and personalized email marketing campaign. They used geolocation to send out offers relevant to specific regions and targeted lapsed customers with irresistible come-back offers.

RELATED: Dunkin’ Donuts Email Marketing Overview

The outcome was a grand slam. They saw an uplift in both email engagement and customer retention rates. The franchise reported higher-than-average open rates and, more importantly, a significant increase in in-store visits during off-peak hours.

Here's the kicker for digital marketing for franchises: It's about acquiring new customers and keeping the old ones . Dunkin' Donuts shows us you can efficiently and effectively with a well-thought-out email marketing strategy.

What a journey through the dynamic landscape of digital marketing for franchises! From social media feats to SEO surges, compelling content to PPC prowess, and finally mastering the email game—each case study demonstrated a unique strength in franchise marketing.

The bottom line is that whether you're a veteran franchise or a startup, harnessing the proper marketing channels can catapult your business to new heights.

Now, how can you replicate these successes? That's where Digital Resource comes into play. We specialize in tailor-made marketing strategies that meet the unique needs of franchises. Don't leave your success to chance; let us help you hit your targets and beyond.

So, are you ready to supercharge your franchise marketing? Contact us today .

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Fill out the form to speak with a marketing expert., related blogs, nurturing leads in the franchise development process, marketing approaches to attract franchise investors, strategies for franchise expansion and development, utilizing social media analytics to enhance franchise strategy, want to work for us.

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Franchise Chatter Guide: Buying an Existing Franchise Business (Case Studies)

Published on February 14, 2014 by Daniel Slone Leave a Comment in Buying a Franchise , Franchise Chatter Guides , Quick Service Franchise

This guide to buying an existing franchise business was written by Daniel Slone , our contributing franchise reviewer.

Often those looking to buy into a franchise brand focus on opening a brand-new outlet. While there is certainly a lot of excitement associated with this process, especially if you attend a franchisor’s “Discovery Day” or similar event, it is not the only path.

I regularly review various franchise opportunities primarily from the perspective of someone establishing a new franchised location. However, the organization that employs me has actually purchased a large number (almost 60 all told over the past few years) of existing franchised quick-service restaurants of various national brands, so I am very familiar with the process.

In this discussion I want to share some of what we’ve learned from our experiences.

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Basic mechanics of buying any existing franchise.

First , you must understand that the buyer of an existing franchise must be approved by the franchisor prior to the transfer, meeting essentially the same criteria that a brand-new franchisee would. In fact, the requirements may be even steeper if you are buying out a multi-unit franchisee, because the franchisor will want to ensure that you are financially capable of taking on the challenge.

Second , you will not be paying only the seller. The specifics vary from system to system, but at a minimum you will pay a transfer fee. Those fees are normally less than the franchise fee but still significant, ranging from a couple of thousand to several thousand dollars per unit. The specifics will be disclosed in the franchise disclosure document (FDD) which you will receive as part of the qualification process, so this will not be a surprise.

In some franchise agreements the language specifies that the seller will pay the transfer fee, but even if that is the case you can expect that the amount will be built into the purchase price. In other words, go ahead and tack the fees onto your valuation of the business itself.

Third, what happens with the franchise agreement varies.

Some franchisors will simply transfer the remaining term of the existing franchise agreement or agreements, so if for example the agreement has an initial term of 20 years and your seller has been in business for 12, you will have eight years remaining. At the end of that time you will sign the then-current version of the franchise agreement, which is standard for renewal in any franchise system, and pay the renewal fee.

In some cases the franchisor for some of our restaurants granted an extension of the existing agreement to delay renewal for a modest fee (around $5,000 per unit, though this is a very specific example, and the same franchisor did this for us in some cases but not in others).

The third possibility is that the franchisor will require you to immediately execute the current franchise agreement with a modified term matching what remained on the seller’s agreement, but this is the least common occurrence.

Again, the precise mechanism of the transfer will be spelled out in the FDD and the franchise agreement (the current version of which is included as an exhibit to the FDD).

Since your attorney will carefully review these documents and advise you, it will be possible to calculate any financial impact of the transfer requirements and include it in your negotiations with the seller. (You will have an attorney review the FDD and franchise agreement, right?)

Knowing What Price You Should Pay

Broadly speaking, the value of the business (which may or may not have any bearing on the asking price, depending on how rational the seller is) is fairly simple: It is the value of any associated assets (in the restaurant business existing stores are often leased rather than fee properties, taking real estate out of the equation) plus the value of the business itself.

If the deal includes any real estate , that’s fine. Getting appraisals from a neutral party is not difficult, and if you have a lender involved in the deal—which you almost certainly will—they will insist on them anyway.

Beyond that, cast a wary and critical eye on any valuations attached to other assets like furniture, fixtures, and equipment (FF&E), vehicles, tools, and so forth. While they may be necessary to the business, their intrinsic value (that is, what you could take them out and sell them for) will be a fraction of what they originally cost.

Your seller may also attach a cost to the franchise agreements themselves, which certainly do have value—that’s the whole point of franchising, after all.

As a buyer you would want to see the seller take a pro rata portion of what he or she paid as a franchise fee based on how much of the term remains. A clever seller might take a pro rata portion of the current franchise fee (assuming it has increased) using the rationale that this is what it would cost you to enter the franchise system now. The actual number will be a matter of negotiation, of course.

The final and primary component is the EBITDA (earnings before interest, taxes, depreciation, and amortization), which is a thumbnail of the cash flow the business generates. Profit and loss (income) statements do matter, but cash flow matters more.

The Three Typical Scenarios of Buying an Existing Franchise

There are three basic conditions under which you will acquire an existing franchise, and fortunately (for the purposes of this discussion, that is) my organization has experienced each one. Think of Goldilocks and the Three Bears: there’s too hot, too cold, and just right .

In the following sections I will describe in general terms our experiences and include some hard numbers (within the limits of preserving my organization’s confidentiality). The case histories all involve quick-service restaurants, so bear that in mind when considering the degree of applicability to your target industry or specific franchise brand, but the good news is that these three cases all involve the same national brand, so we will have good apples-to-apples-to-apples comparisons.

In general terms, there are only a handful of common reasons for someone to sell a business . One is that someone comes along and offers a price that the owner simply can’t refuse . The old saying about poker is that if you sit down to a game and don’t know who the sucker at the table is, it’s you. Deals like this tend to be that way: either the buyer or the seller probably knows something the other doesn’t. People don’t build the financial wherewithal to buy a business by making stupid financial moves, and overpaying for a business is one.

Another reason is that the business owner is ready to retire, get into a different business altogether, or otherwise move on and does not have family to whom he or she can (or will) hand over things. These are usually the good deals. The business is reasonably healthy, and the purchase can normally be negotiated to a reasonable price.

The final major category is what we politely call “distressed operations.” These are the businesses that have gone to hell in a handbasket for whatever reason and that the owner must sell—whether because he or she no longer has the financial means to operate, because the franchisor is leaning hard on him or her (failing operations make the brand look bad, after all), or because for whatever reason a fire sale has become necessary. These can be winning deals—we’re about to look at one that was—but there are a number of conditions that go into achieving success.

Papa Bear’s Porridge: Too Hot (Case Study #1)

In March 2011 we had the opportunity to purchase nine units (as a reminder, all three of these examples involve the same national QSR brand) in a significant East Coast market. This was no fire sale; instead, these were franchisor-owned stores that the parent was willing to divest.

This opportunity is found most often with very large, very established franchise systems; if that’s the sort of franchise you want, buying corporate stores can be the best way to gain entry.

They had been operated and maintained well and were producing good cash flow and EBITDA. In November we added a tenth location , followed by an eleventh at the end of May 2012 .

The key to success in this situation—something we replicated multiple times—was to bring in the right operating partner who had expertise in the business and pay and incentivize him properly to run the operations. Our organization provided the back-office administrative and financial support, but our guy on the ground—who had about 20 years working for the franchisor—had full rein over running the restaurants.

The principle here is pretty simple: Don’t get into a business you don’t know well unless you can bring the right expertise on board.

Starting out with new franchises is different ; in addition to full training from the franchisor, you’ll have time to learn the intricacies of how the business works as your holdings grow. But an existing multi-unit business is like a fire that can too easily get out of control and burn away your operating capital before you learn what you need to know—a painfully expensive education.

The Results in Numbers

Year-over-year growth for the original nine stores from April 2011 to April 2012 was about 0.8 percent —certainly nothing to write home about. But performance was already solid; 2011 net ordinary income (only from mid-March for nine stores and from mid-November for the tenth, remember) was nearly $700,000 , a rate of 7.9 percent of gross revenue .

Total expensed acquisition costs were only about $16,000 (things like franchise fees that are part of the purchase price are not taken as an expense immediately; rather, they are amortized over varying periods). But in addition we executed a sale-leaseback of one of the stores (a sale of real estate in which the buyer agrees to lease the property back to the seller). The proceeds of the sale were $900,000, which we used to reduce our long-term debt.

Speaking of debt, we initially financed $3.45 million; another $432,000 came from investors and the rest from us. So a purchase price of $4.2 million plus another $615,000 for the tenth unit in the first calendar year generated a 14.3 percent return on investment .

In 2012 gross revenue was $11.83 million—bear in mind that an eleventh unit was added at the end of May. Net ordinary income increased to 8.9 percent of gross revenue , or nearly $1.042 million .

There was not any significant deferred maintenance—one of the major risks of buying existing businesses. Repair and maintenance costs in 2011 were 2.9 percent of revenue, dropping only slightly to 2.7 percent in 2012. (A typical number for our operations is between 2.0 and 2.5 percent, but typically on the higher end of that range for older stores.) We did invest in remodels of four units at roughly $150,000 each.

In late 2012 we were approached by an interested buyer. Although we had not been actively seeking to sell the operation, the offer represented a significant premium over our purchase price—not counting the nearly $2.1 million in income the operation generated for us between March 2011 and March 2013.

You may wonder, then, why I described this deal as “too hot” when in actuality it worked out very handsomely for us. The “too hot” moniker refers to the fact that a successful existing operation will often command a premium price.

Of course, such a business should also be generating healthy income and cash flow and should not have many blemishes that require attention. As long as you do not overpay—and sometimes that’s the trick—you can be very happy with Papa Bear’s porridge. But don’t expect any bargain-basement prices.

Mama Bear’s Porridge: Too Cold (Case Study #2)

The most common way to get a bargain price is to find a distressed operation . Other than scale, there is little difference in buying a distressed business and buying a fabulous but beaten-up antique at a garage sale: if you have the skills, patience, and money to restore it, you can end up with a gem at a great price.

Those “ifs” can be significant, though—something we experienced with our third acquisition.

Our third deal was also for 10 units . They were owned by a large franchisee with about 150 units total in the system scattered across the U.S. (and outside it; they have stores in the Virgin Islands, which is also where they are headquartered). The seller also had other business interests, and frankly these restaurants had clearly been a very low priority.

If you can name the problem, these stores had it—delinquent property and sales taxes, pending remodels, a truckload of deferred maintenance, rampant theft and waste, poor store-level management, and an operations manager who ran the units like his own little fiefdom—his own little poorly-managed, nepotism-ridden, drowning-in-red-ink fiefdom.

We took over at the beginning of August 2012, and for 2012 food cost was a whopping 35.5 percent , repair and maintenance costs hit 3.6 percent , and we incurred a net operating loss for the year (which was only five months) of $268,000 or 9.4 percent .

This past year was better, but only in relative terms. We cut the net operating loss to 3.8 percent , but as we got heavily into remediation our repair and maintenance costs for the year shot to 4.3 percent —about double what it would be for “normal” stores. We hired a new operations manager, fired him, and hired another new one.

We sank a few hundred thousand into mandatory remodels, and by January 2014 we had closed three underperforming stores.

Creative Financing—and Its Limits

We actually paid more for these units— $5.65 million —than we did for the ten better-performing stores in our first deal. While that might seem counterintuitive, the price was higher in part because of creative financing. This deal was done with no cash out of pocket. How?

The first piece was that $1 million of the purchase price was owner-financed . The seller was willing to agree to this since he understood how distressed the stores were and how hard they would be to sell at anything approaching a decent price.

But the truly creative part was the simultaneous sale-leaseback of seven of the stores (three were already leased properties) to provide the capital for the deal. In other words, the purchase included the real estate for seven locations (the other reason the purchase price was higher than our first deal, which had included almost no real estate).

We closed the purchase and simultaneously sold the properties to a third party and leased them back, using the proceeds to buy the stores that we had just sold them. (If the chronological contradiction inherent in that notion makes your head hurt, have some sympathy for me—I had to figure out how to accurately book the transaction.)

In other words, rather than incurring debt we incurred rent . Now, your first reaction might be that debt eventually gets paid off while rent is forever. You’re absolutely correct. However, our intent is to rehabilitate and eventually resell this operation, hopefully in a timeframe that would not have permitted full repayment of long-term debt.

Besides, once we get this operation to profitability and taxes become an issue, rent is fully deductible , but only the interest portion of debt maintenance is.

Of the three deals under discussion here, this was by far the least successful. The bottom line is that the operations have been harder to rehabilitate than they were in the second deal (coming up next) and there has been far more expense involved in bringing the stores up to par.

This is why purchases of distressed operations require very careful due diligence. If you are not capable of pumping $250,000, $300,000, or even more each year into the business for a few years, you would be better off looking for something in better shape even though it is more expensive.

Baby Bear’s Porridge: Just Right (Case Study #3)

Our second deal (chronologically) illustrates a favorable outcome of rehabbing distressed operations. This is the story of another ten units —only one state away from our first set of stores, as it happens—that were in pretty dire straits. However, in this case the problems were more with the owners than with the restaurants themselves.

The owner was behind on royalties to the tune of about $230,000, had delinquent property taxes hanging over him, and even needed an advance from us (applied against the purchase price, of course) to meet payroll.

We acquired these stores in stages between May and October 2011 , and only purchased the associated real estate for seven of the locations in April 2012 . This deal was conventionally financed with a combination of debt (approximately $5 million) and cash flow, plus a small portion ($350,000) of owner financing.

In the first calendar year of operations we suffered a small net operating loss of less than $23,000 or 1 percent . Another $300,000 in acquisition costs has to be added to this, however. There was a little deferred maintenance to address—repair and maintenance costs for the year were 3.2 percent—and we had to begin a series of mandatory remodels that we are finishing up this year.

In 2012 we had another net operating loss , this time 1.2 percent or a little over $100,000 , but EBITDA was positive — we booked $305,000 in depreciation and amortization alone. Cash flow for the year was positive. Repair and maintenance came down to a more typical 2.6 percent, although it must be remembered that remodels are capitalized and so not included in this expense.

Getting Things “Just Right”

In 2013 our rehabilitation paid off. Net ordinary income jumped to 4.9 percent or $446,000 . Cash flow doubled from its 2012 level. Revenue increased from $9.064 million in 2012 to $9.272 million in 2013.

During this time we also restructured the balance sheet. In 2012 we began a gradual process of sale-leasebacks (in this case to individual buyers) of the seven fee properties. The sale of six in 2012 and 2013 (we still own one) produced gains on asset disposal of $1.19 million in 2012 and $1.411 million in 2013 .

Most of those proceeds were combined with some of the proceeds of the sale of our first operation to retire all of the long-term debt for these companies, which provided a boost to income in 2013 by cutting interest expense from over $163,000 in 2012 to only $17,300 in 2013.

This deal was also the first time we gave our operating partner—another veteran of the franchisor’s corporate organization—a small (15 percent) sweat equity stake in the company in addition to his salary. Equity can be a great way to bring on board operations talent that you might not otherwise be able to afford.

As you can see, creative financing and identifying a business that was less distressed than its owner allowed us to fix what was wrong, retire debt, and improve both revenue and income all in fairly short order. In the course of just over two years we turned 10 restaurants into 31 and by early 2013 had no bank debt. Every deal is different, though, and as you can see we had significantly varying degrees of success even among just three deals for the same franchise brand.

Buying an existing business can be a great way to enter an established brand that has few available new markets and to immediately enjoy significant revenue. However, with significant revenue comes significant expense, and if the business in question is not generating positive cash flow, the money to cover the difference will have to come from you . Be absolutely certain you can take on the burden, and assume that things will be worse than you initially expected—in my experience they usually are.

In the course of your due diligence remember that what the current owner’s financial statements say is not the whole picture. In the case of distressed operations, it is safe to assume that money that needs to be spent isn’t being spent, and so to rehab the business you will have to take on increased costs . In other words, if the seller’s income statement looks a bit scratched up, yours may well look bruised and bloody, at least for the first year or two.

Taking on an existing business can be gratifying, exhilarating, frustrating, and exhausting all at the same time. But just as with buying a new franchise, you have the opportunity to build something of value to either keep and hand down or sell that will carry your stamp and the unique signature of your efforts.

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4 Franchise eCommerce Case Studies

As a franchisor, you know that operational hurdles can halt your growth and hinder your success.

Maybe you find yourself fulfilling orders for things like aprons, uniforms, and menus out of a marketing closet in your corporate HQ.

Maybe you find yourself with 12 distribution centers (and counting), seemingly necessary in order to support your growing number of franchise units.

Maybe you realize you are making it increasingly difficult for franchisees to order supplies from such a large number of suppliers, all who have their own ordering site or system.

There comes a point in every franchise’s life when you hit a crossroads:

(1) keep operating your business the way you have been and miss out on the opportunity to support sustained growth, or

(2) focus on improving your processes and systems so that you can move at the speed of tomorrow.

Operational stress becomes a time to contemplate how to create systems that will give you a competitive advantage so that you can continue to attract top business leaders to your franchise network for years to come.

Franchisors - from emerging to established - are future-proofing their business growth with eCommerce, order management, and marketplace solutions that generate game-changing results.

Here are 4 Franchise eCommerce Success Stories:

1. A franchisor with multiple resale brands enables franchisees to extend retail sales online.

The franchisor delivered a B2B2C eCommerce experience to franchisees. Local franchise units can now extend their sales online. It empowers franchisees to self-manage their complicated consignment inventory. Customers of the franchisees are able to shop from all locations online, and complete single transactions that contain products from multiple locations.

2. A fast food franchisor automates all ordering of supplies not-for-sale, creating a B2B ordering hub for franchisees.

The franchisor created a modern, online order management solution. Now, restaurant locations can order everything they need to run their business, from any franchisor-designed supplier, via an intuitive, convenient, 24x7x365 online experience available on any device.

3. A fitness franchisor automates the supply chain, connecting global franchise units to the supplier network via a B2B marketplace.

The franchisor connected global franchise units to their supplier network via a private, B2B marketplace. Franchisees can log-on and place orders from the suppliers the franchisor assigns to them. The franchisor’s vendor management team now has options for how they want to manage relationships with their suppliers. The franchisor now has more control and a bigger picture strategy for their supplier network and service to franchisees.

4. A beauty franchise empowers salon staff to place high volume orders online instead of calling a call center.

The franchisor delivered a one-stop-shop for ordering for all salon locations. Salon stylists and staff can now browse, shop, order, and reorder products in a self-service manner. Dynamic search capabilities make ordering hundreds of line items per order fast and efficient. Customer service and sales staff who used to take orders over the phone can now spend more time developing relationships with franchisees.

Four51 has spent the past 20 years helping franchisors scale operations, streamline vendor relations, and grow franchise units via eCommerce technology and automation.

If you find yourself handcuffed by outdated processes that are keeping you from growing as a franchise, it’s time for a change. Four51 is delivering custom, scalable eCommerce, order management, and B2B marketplace solutions to franchisors that are propelling them into the future.

Download our full franchisor eBook - 4 Franchisor Success Stories: How eCommerce, Order Management, & Marketplace Technology Supports Franchise Growth - for more details and to learn more.

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Franchise success stories and franchisee testimonials.

Franchise Case Studies are an essential ally to your franchise research. Reading about people who have been where you are now, considering starting their own business and taking one of the biggest decisions of their lives, can be extremely helpful and give you the confidence you need to take the step into self-employment for yourself.

Read all the latest franchise case studies, franchise testimonials and other franchise success story features. Case studies are being added frequently, so check back regularly for latest franchise case studies.

Newest Signs Expess franchisee Kris Bell, expanded into his neighbouring territory of High Wycombe, operating under the hub and spoke model within 12 months.

Former Primary Teacher, Carrie Ann Elmer talks about the Cook Stars Franchise and the highlights of running her business over the past 5 years.

16 clients, over £100k income and still growing and only just starting year two!

Chloe loved gymnastics as a child, had a background in marketing and always worked with children and therefore she started her First Gymnastics Franchise Business.

From Signmaker to Franchisee, to Network Champion!

Network Champion, Richards Howes, Network Champion and owner of Signs Express talks about his inspiring journey from joining Signs Express to becoming the successful business owner he is today.

By running your own Concept Claim Solutions Franchise Business you benefit from flexibility, financial independence and make a real difference in people's lives.

After opening his first Snap Fitness in 2019, Peter has quickly gone on to become a multi-unit owner, opening a further four territories in the UK with a further three territories secured in Ireland.

Dynamic Duo - Marrying A Love Of Fitness And Business For Snap Fitness Multi-Unit Success

Property and hospitality duo, Olga and Gurnake Cheema, had over 15 years combined property investment and hotel management experience when their search for a fitness franchise led them to Snap Fitness

Despite the pandemic hitting in 2020, Nigel was able to bring on new clients and achieve good consistent growth throughout the year” allow him to purchase his second territory in 2021.

Despite his success, Lee was eager to expand his skillset and explore new opportunities in the plumbing industry.

UK Franchise Opportunities and Business Opportunities for Sale. Explore our wide range of UK Franchises and browse information about franchising including franchise news, case studies and lots more. Totalfranchise is the leading UK franchises resource to help you start a franchise business.

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Creating a Franchise Sales Success: A Case Study

Family business. Because of its low barrier to entry, low cost of scaling, and doing business over multiple venues, FPG thought it would appeal to families looking to start a community business.
Young guns. These are young, entry-level to mid-level managers who gravitate towards simple, home-based businesses where they can make it on hustle, rather than skills or business acumen.
First-timers. This is the mid-level manager who has hit their ceiling in the organization they are in. They may be lightly capitalized and are looking for the business to quickly replace their salary in order to meet household expenses.
FPG fully integrated lead generation, franchise opportunity website design, franchisee recruitment process, lead nurturing content, and meeting protocols under the FPG Full Stack franchisee recruitment system, unifying all aspects of the franchise development department and eliminating competing personal agendas.
FPG and i9 Sports replaced the ineffective outsourced recruiter with a highly effective FPG-trained franchisee recruiter who understood FPG recruitment tactics and strategies.
FPG redesigned the franchise opportunity website, changing the focus from the love of sports to the business of sports, making a strong business case about what makes the business unique, profitable, sustainable for the long haul, and necessary to the customer. See the site here.
FPG expanded its target franchise candidate from the passion player, to also include first-timers, young guns, and family business. FPG included content, videos, infographics, and franchisee testimonials to appeal to these different buyer archetypes.
Lead engagement and lead nurturing content. FPG designed a downloadable Franchise Opportunity eBook to entice visitors to leave contact information. The Franchise Opportunity eBook was designed to provide more in-depth information about how the business works and what it takes to succeed, moving qualified and engaged candidates deeper into the sales funnel. Download eBook here.
FPG created talk-show style videos featuring an in-depth interview with the CEOs of FPG and i9 Sports discussing vision, mission, merits, tactics, and strategies of the brand. See example at the end of this article.
FPG worked with i9 Sports to create an internal financing vehicle. Being a 65K investment, candidates would not access SBA lending, as lenders prefer larger startup packages. I9 Sports reduced the entry costs by about 50%.
Strong unit-level economics and franchisee-franchisor relationships.
Unique, profitable, defensible, and valuable consumer offering.
Clear franchise buyer target demographic (franchise buyer archetypes).
Clear value proposition as a franchise opportunity that resonates with the franchise buyer archetypes.
Intelligent content strategy that meets or exceeds the qualified franchise buyers’ demand for information. (Website, eBook, brand videos, infographics, collateral content, PR)
Highly effective franchisee recruiters skilled in managing the new franchise buyer-centric, self-directed, content-rich recruitment process.
A content and franchisee recruitment process consistent with how franchise buyers make investment decisions.
Effective departmental leadership and strategy.
Ready-to-go financing sources who understand the brand.
A skilled digital agency that understands the difference between leads and buyers.
Know your target franchise buyer archetype and produce content specifically to meet their needs.
Redesign your website. Cost: $25K-$30K.
Shoot a 10- to 15-minute documentary-style video that tells your brand story and details your value proposition of your business to your target franchise buyer archetype. Cost $10K-$15K.
Write a 20-page case study eBook on your brand. Make a classical business case (with charts, infographics, KPIs, etc.) as to what makes the franchise unique, defensible, valuable to the customer, profitable, sustainable for the long haul, and a wise place to invest time, money, and energy for the right person. Cost $10K-$15K.
Train and develop your franchisee recruitment team on modern recruitment techniques. Cost $10K.
Hire talented recruiters who understand the new franchise buying paradigm. Cost: $8K-$10K per month plus commission.
Hire a C-level franchise development strategist for 6 months to replace your old tools and tactics with modern, proven techniques. Cost: $10K per month.
Early Stage: 10 deals per year.
Emerging Growth: 12-30 deals per year.
Regional Brand: 24-40 deals per year.
National Brand: 40-100 deals per year.
Resurgent/Turnaround brands: 12-24 deals per year.
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Accounting Tax Service
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Children Kid Franchises
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Painting and Home Improvement
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Photography Master Franchising
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Franchise Opportunities
Case Studies

Business Franchise Case Studies

My franchise story: from programming to prosperity.

ActionCOACH franchisee Rob Pickering traded in his computer for coaching, and he hasn’t looked back since

“A positive work-life balance enhances dedication, motivation, and job satisfaction”

World Options, a web-based courier and shipping service, provides the opportunity to work hard whilst still getting time to yourself

Breaking the ice in Chester

As the Aspray Chester franchisee, Iain Speedie is bringing his A-game to promoting the Deeside Dragons

“I knew through our partnership we would unlock more potential growth and, as a result, make a difference to the planet”

With the help of ActionCOACH UK, Arif Hussein put the roots in place to develop a more profitable business that also...

Business networking as a win-win-win

Nigel Brookes, CEO of Business for Breakfast UK, explains how the brand improves the value of its franchises and supports like-minded...

“The reality is I’ve always been training to be an Action Coach… I just never knew it”

Hear how ActionCOACH has transformed Andrew De Groot’s life for the better

“After ActionCOACH were on board, we had steady, continuous growth”

ActionCOACH franchisee Anu Khanna has been helping business owners increase their profits and build a strong team

“If I want to do something one day that is completely different, then that is fine – it’s my time, my focus, my energy”

After taking a leap of faith to start his own business, Granger Forson shares what a day in the life of...

BforB champions the value of face-to-face interaction

In an ever-changing climate this company is spearheading the changes of business marketing in a new and innovative way

Page 1 of 13

Ones to watch

Franchisors provide an insight into how they’ve built their businesses.

The Radfield Home Care Story

Canopy Children’s Nurseries

Passionate about giving children the best possible beginnings

Guardian Angel Carers

Offers outstanding, comprehensive ‘family-feel’ home care services

Provides live-in and visiting-hourly carers to a wide range of clients, including older people

N.Bar was the first to transform routine nail care into a sought-after personal ‘experience’ for...

Just Shutters Business

The UK’s largest independent plantation shutter specialist for domestic homes and business properties

Platinum Property Partners

The world’s first property investment franchise, based on a lucrative professional HMO model

Smoke & Pepper

Smoke & Pepper was developed from a busy family kitchen with a desire to serve high quality comfort food...

PACK & SEND

National and international specialist packaging and delivery company

Subway Resale Opportunities

The first Subway® store was opened in 1965 by Fred DeLuca and Dr Peter Buck. It was the first company to...

Dyno-Rod Drains

Drainage based management franchise servicing customers throughout the United Kingdom

Dyno-Rod Plumbing

This is a management business where your role is to lead your team of engineers, managers and administrators....

Kitchen Makeovers

Run your business from home and control your lifestyle while making an income. The Kitchen Makeovers...

Chicken Cottage

The go-to quick service outlet for the world’s most flavoursome grilled and fried chicken and succulent...

World Options

Offers an easy to use, web-based courier and shipping service for businesses of all sizes

YO! sushi kiosks

YO! is recognised as one of the most successful sushi restaurant Japanese food brands in the UK. The...

Specialises in keeping people mobile, while enhancing social interaction and mental stimulation

Amigos Burgers and Shakes

Amigos Burgers and Shakes is extremely family-friendly, and the brand believes that there’s something for...

The Little Foxes Club

Changing sports coaching for children aged 18 months to 14 years. Delivering fun, fitness and promising...

Offers delicious Korean street-style food to consumers

Cakes & Bakes

provides personalised celebration cakes from franchised locations

Taking the UK by storm with its Instagramable interior styling and varied high-quality menu

Burger Drop

Burger Drop is BFA accredited, and founded in 2020, with the vision to create an affordable luxury burger...

Blam Partners

Start a Blam Business: Your Digital Agency Franchisee

Premier Education

Provides sport and physical activity to schools across the country

No Letting Go

No Letting Go provides a variety of property management services, including landlord inventory, tenant...

Jackson Fire & Security

For fire and security solutions

Leading provider of ultrasound scans across the UK

Chop & Wok

A wok-based restaurant and takeaway business that serves Pan-Asian fusion food

Aspray Limited

Aspray is an award-winning claims management provider that has developed into a successful franchise

The Travel Franchise

Start your own home-based travel agency

Dolce Desserts

Dolce Desserts takes inspiration from the genuine, hearty cafés found dotted around the hotspots of Europe,...

The famous Taiwanese bubble tea brand from graphic designer Mao-ting Chiu has grown to 450 locations across...

Radfield Home Care

As a prospective franchise partner, you’ll be joining 2023’s Most Outstanding Home Care Franchise...

Business Partnership

The largest independent nationwide business brokerage firm with local representatives located across the UK

Fun Fest for Children

Offers a range of different childcare and children’s services franchise systems

Auntie Anne’s

Auntie Anne’s is known for its freshly baked, soft, straight-out-of-the-oven pretzels in a variety of sweet...

The Bike Fitters

The Bike Fitters is an opportunity to combine a passion for pedalling with earning money by becoming an...

The Fruit and Veg Man

The Fruit and Veg Man operates as a community-focused supplier, offering both online and in-person services...

ActionCOACH UK

CompareTheFinancialMarkets.com UK Business Opportunity of The Year offers the chance to join the 2nd fastest...

The Urban Chocolatier

High-end dessert parlour for aspiring franchisees

Post & Packing

Post & Packing is your very own walk-in mailroom, for retail and business customers alike. As an...

Explorer Travel together with Hays Travel

provides franchisees with the chance to work in the travel industry on their own schedule

Some say Poppies is a pioneer due to the brand being the first cleaning franchise in the UK. Currently, 89%...

Granite & TREND Transformations

Provides home renovation services, specialising in kitchen and bathroom renovations

Provides a premium clearance service in both homes and businesses as well as servicing many national contracts

Oodles is an Eastern-inspired quick-service restaurant, revolutionising boxed food with theatrical live...

Paris Baguette

provide fresh baked goods and coffee to the community

Anytime Fitness

The UK’s largest fitness franchise, with more than 188 premium, convenient clubs nationwide

Kaspa’s Desserts

Delicious desserts in a fun and exciting environment

Betterclean Services Franchising

Provides commercial cleaning services for a variety of businesses

Discover this lucrative franchise opportunity with Drivalia, a leading car rental company spanning 13...

Crunch Fitness

Crunch is a gym that believes in making serious exercise fun by fusing fitness and entertainment with the...

Body Fit Training (BFT)

Australia’s fastest growing and most advanced fitness franchise

Brokerplan Academy

A unique opportunity to build your own brokerage and become a finance specialist

You Me Sushi

Refined model offering a fresh and unique approach to Japanese cuisine

Provides a profitable way to succeed in the oven cleaning sector

Mail Boxes Etc.

A multi-functional retail and B2B operator offering post, parcel, print, and virtual office address services...

Business growth consultancy, BizSmart®, helps businesses grow and scale up. It offers a range of services...

Blossom Home Care

Built around profitability, cash flow and ease of operation, delivering greater satisfaction for you as a...

It’s been eight years since Hitsona opened its first studio. Now, the company operates in six countries...

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You're the boss | is this business ready to open franchises, is this business ready to open franchises.

Josh Skolnick: Is franchising a faster, better path to growth?

What would you do with this business?

We just published a case study about a suburban Philadelphia company called Monster Tree Service. Having grown his two-year-old, 15-employee business to more than $2 million in annual revenue, 29-year-old Josh Skolnick wants to expand beyond the working radius of his Fort Washington, Pa., office.

He’s weighing two options:

One, open a second corporate office — and then others. He figures the second office might cost as much as $500,000, including the necessary equipment and bucket trucks. He would pay down the resulting debt out of future revenue.

Two, expand by franchising, with lower costs upfront. Mr. Skolnick estimates the initial costs of setting up as a franchise at about $100,000. Granted, he would need to hire a director of franchising and, in time, various franchising employees. But capital expenses for entering new markets would be covered by his franchisees.

He has been warned that it could take as many as 15 operating franchises before he earns back his investment. Then, presumably, the gravy would flow. But he worries that, even though he would be passing along solid, replicable business systems, he would still have to trust other people with his brand. Should the loss of control be his primary concern? Is franchising a faster, better path to growth? Which option positions him best for the future?

Below, you’ll see the recommendations provided by several owners and consultants who are familiar with franchising. Do you agree or disagree with their recommendations? Use the comment section to provide your advice for this start up. Next week, we will publish a follow-up post with the latest on Mr. Skolnick’s plans.

Burton D. Cohen is the managing partner of Burton D. Cohen & Associates, a franchise consulting firm based in Chicago, and a lecturer on management and strategic franchising at the Kellogg School of Management at Northwestern University: “Josh is a driven, successful serial entrepreneur who has also demonstrated the ability to manage a multistate mulching business, apparently solving span-of-control issues. While expanding through wholly owned operations will require more capital than franchising, the hard and soft costs of franchising, both initially and on an ongoing basis will not be insignificant. He should have no trouble raising capital and finding and training one or more regional managers. Finally, if he plans to sell the company in a relatively short period of time — five years or less — as he has done with his other companies, a wholly owned operation will be much more attractive to a potential buyer than a franchise system with only a handful of franchisees.”

Ambrosio Cantada is the founder of Franchise Chatter , a site devoted to reviewing franchise earnings claims: “I would advise Josh to open a second corporate location to prove that his model works beyond his current market. Without a solid track record of success across multiple units, attracting the best franchisees will be a significant challenge. Moreover, with a second corporate location, Josh can hit the ground running and leverage the operational experience he already has, without having to develop an entirely new skill set. Josh faces a much steeper learning curve with franchising because his focus will inevitably shift to selling franchises, training franchisees, and making sure they are satisfied with their investment. If his second location is as profitable as his first, Josh should have no problem paying off his loan, and he’ll have a much easier time convincing qualified franchisees to sign on when he is ready to franchise.”

Susan Sarich , founder and chief executive of SusieCakes bakeries , with eight company-owned locations in California: “Firstly, he has not yet proven success in a secondary market nor built the infrastructure to support a satellite operation. I think this step is critical before he even considers selling Monster Tree to franchisees to execute. Secondly, I believe too many companies choose to franchise before they are large enough to attract multi-unit, sophisticated franchisees. Given the large equipment investment his concept requires, he would need well-capitalized operators, which may be difficult to source without further proof of concept. Finally, he will need a large investment to build out the infrastructure required to become a franchiser: creating legal documents, developing training and marketing materials and hiring the sales and support personnel.”

What do you think?

What's Next

Making the Decision to Franchise (or not)

Even firms that have a standardized business face the challenge of serving customers with different preferences and behaviors when that model is stretched across multiple markets.
By choosing to franchise, the firm minimizes exposure to risk in a relatively unfamiliar market; as a tradeoff, it also gives up some measure of control.
Chains that don't franchise employ fewer corporate and supervisory staff relative to the number of store-level employees.
Early evidence from ongoing research indicates that unit sales are lower for firms that expand into multiple markets without franchising or providing some incentive system for local managers.

From neighborhood to neighborhood—even from block to block—customers have different tastes in the products they buy and the retail experience they find most enjoyable.

As a business owner operating stores across multiple markets, is it possible to please everyone? Can executives back at headquarters maximize an organization's overall revenues by efficiently (and effectively) monitoring the desires of consumers representing a wide range of ethnicities and income levels, large families and singletons?

Much has been written about product differentiation and its role in retail success. Now the less well-known dynamic of customer differentiation and its effect on the way businesses are structured and run is examined in a recent Harvard Business School working paper, " Organizational Design and Control across Multiple Markets: The Case of Franchising in the Convenience Store Industry. " The study was written by HBS professors Dennis Campbell and Srikant Datar, with Tatiana Sandino (HBS DBA '04) of USC's Marshall School of Business.

"Franchising is a very observable, real choice that organizations make." -Dennis Campbell

"The basic idea is to think about how the complexity of the customer-facing operating environment affects organizational design choices such as control systems, incentives, performance measurement, and ownership structures," explains Campbell. "Even firms that have very standardized business models in terms of products, labor, and merchandising will face the challenge of serving customers with different preferences and behaviors when that model is stretched across multiple markets."

As a starting point in their research, the authors focused on the organizational decision to franchise or not franchise some stores when these outlets served markets with different demographic characteristics.

Motivated Managers

That is one of the biggest decisions a business can make, Campbell says. Franchising creates a strong motivation for local managers to maximize performance, since they're rewarded with a residual profit from revenues. The firm minimizes its exposure to risk in a relatively unfamiliar market; as a tradeoff, it also gives up some measure of control.

To explore the link between franchising and the challenge of operating in diverse markets, the authors analyzed data from 420 convenience store chains, finding that chains operating in disparate types of markets were more likely to franchise stores.

They then focused on 43 chains that own some stores and franchise others, and drilled down further to the 34,892 stores operated by those chains to ensure that the decision to franchise was driven by the firm's decision to serve new or unfamiliar markets.

In the third part of their study, they investigated how 53 chains that don't franchise manage operations across multiple markets. They found evidence that chains serving more diverse markets decentralize their operations by employing fewer corporate and supervisory staff relative to the number of store-level employees.

"Franchising is a very observable, real choice that organizations make," says Campbell. It's also an extreme solution to the challenge of operating across multiple markets; future research will focus on other, more subtle choices.

"Firms that don't use franchising still decentralize their operations more; or they may provide more variable pay to employees when operating across diverse market types," Campbell continues. "Reporting structures, performance measurement systems, communication, IT strategies that allow for efficiency in stocking policies—these are all factors we've observed and intend to study further, in addition to measuring their effect on performance."

"When an organization sets up its structure, there's a lot of talk about alignment and fit relative to the addition of new products," adds Datar. "What we're seeing in this research is that also appears to be true when you get a new type of consumer for the same product."

In the pharmaceutical industry, for example, selling medicine to both an independent general practitioner and a hospital will require a different organizational structure than if a company targeted one customer or the other.

Organizational Design And Performance

The impact of organizational design choices on performance will be considered in other papers; Campbell notes that early evidence indicates that unit sales are lower for firms that expand into multiple markets without franchising or providing some incentive system for local managers.

"This research is really a starting point," says Campbell. "To our knowledge, no one has drawn this link between the complexity that is imposed by customers with divergent demand preferences and these broad organizational design choices."

There are broader implications, too.

"It's possible to think about this in a global context," says Datar. "If my organization is operating in the United States and in China, that demands a very creative response in organizational structure."

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05 May 2020
Research & Ideas

China Tariffs and Coronavirus a Double Hit to American Retailers

11 Apr 2024
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Franchise Analysis

🍟 4/24/2023 – Yale Releases Case Study On Franchises

DEEP DIVE

Yale Explores Franchises

Over a month ago I was contacted by a professor at Yale who had come across my content, and wanted to chat to learn more about franchises.

The professor let me know he was writing a case-study for his MBA students on the pros & cons of franchise ownership. That case study was released about a week ago, and provides incredible depth on the pros and cons of being a franchisee.

If you want to dive into the full-case study , you can do so here . Below I’ll give the highlights and some interesting facts I found that are helpful for you to know!

Obvious Disclaimer: You Don’t Need an MBA To Be A Franchisee

The beauty of franchise ownership (and small business ownership in general) is that your network, resume, degree, etc. don’t matter. There are no prerequisites that need to be met to be invited to have a seat at this table of entrepreneurship.

If you want to own your own business, all that’s required is the will to go out and get it. Folks like Lucas Mitchell are a great example of this – a college dropout who now owns 15+ Five Guys locations.

That said, much has been written about the “ Silver Tsunami ” in the past few years, and it seems people are starting to wake up to the benefits of small businesses that are franchises.

Given that, I do think franchise ownership will become more competitive in the coming years, as more people, such as MBA students, look to strike out on their own versus work for a mega corporation or consulting firm.

While having an MBA doesn’t truly mean anything in the world of small business, the skills these students bring to the table can certainly be a differentiator, namely financial modeling, intelligent capital and resource allocation, acquisition valuation, cap table structuring, organizational management, etc.

Michael Horowitz, whom I had on Franchise Empires in season 2, is a great example of the MBA caliber franchisee. A graduate of Harvard Business School, he got into franchise ownership by acquiring seven Wingstop’s in 2018 , and has quickly grown it into a 20+ location empire.

Many of the skills I previously listed are not only what helped make him a successful multi-unit owner, but also assisted him in even being able to break into a nationally competitive brand like Wingstop as a first time franchisee.

To reiterate what I said at the beginning, below are some of the highlights of the case study that are helpful/interesting to anyone interested in franchise ownership.

12 Reasons Why MBA-Students Shun Franchises

Social stigma – this is as uncool as you can get
Royalty payments
Most franchised businesses lack contractual recurring revenue and are B2C
Same-store growth can be capped and therefore growth could be capital intensive
Organic and acquired growth requires franchisor approval
Barrier to entry in a system
Limited buyer pool when exiting
Constraints on operating policies
Many franchisees have low-wage labor with very high turnover rates
Low awareness or resources in elite MBA programs – no peer momentum
Franchisor might overdevelop and impair economics
Low perceived social impact

Many of these reasons overlap with why most people in general will overlook franchise ownership.

You have to pay royalties, the franchisors may sell a location down the street from you, and you have zero operational freedom! Right?

As you know, this isn’t the case the large majority of the time. If it was, there wouldn’t be people like Greg Flynn who have become multi-billionaires by just being a franchisee. Nonetheless, these preconceived ideas exist because there have been bad actors in franchising that give the industry as a whole a bad name.

On that note, the case-study did dive into what gives the franchisee the highest chance of success.

Brand x Location

Back in early February I wrote a deep dive titled “ Don’t Forget About The Real Estate ”, which was effectively a reminder that while the franchise brand you choose is critical, so is the location you secure, and the geographic market you operate in.

Depending on your market, a brand may or may not be a good fit.

Yale’s study also finds this to be the case, that to set yourself up for the highest chance of success, it’s not just about picking a strong brand, but also operating in a market that strongly supports said brand.

12 Reasons Why MBA-Students Should Consider

Proven business model
Stable revenue and cash flow streams
Highly fragmented acquisition opportunities once in the system
Easier integration of acquisitions
Opportunity to rent the brand
Community of shared knowledge
Some banks have specialty lending units that focus on franchisees
Some systems have extremely compelling 4-wall ROIC and unit economics
Unique real estate economics
No need for a great idea
Shallow competitive talent pools
Franchisor might favor a professional, credentialed CEO

I’ve harped on quite a few of these over the last 12 months, in particularly point 3 & 4.

If you’re looking to build a multi-unit platform, franchises offer more acquisition opportunities once you break into a brand, and each location is easier to integrate thanks to the uniformity of franchises.

This is contrasted against the “search entrepreneur” that is looking to acquire numerous mom & pop businesses who all have a different brand, culture, operating system, website, etc.

Overall, these 12 reasons are all great indicators of the benefits of franchises, and is why you see successful multi-unit operators out there.

Interesting Nuggets

Below are some of the more interesting facts on franchising in general that Yale found from doing numerous phone calls like the one they did with me.

Franchisor Acquisition Multiples

Given the capital light and recurring revenue model of franchisors, they trade at significantly higher EBITDA multiples than franchisees. An excerpt from the case study reads:

According to a tier-one private equity firm, with twenty-plus franchisor acquisition observations totaling more than $30 billion in trading value, the average buy is 5x revenue and 16x EBITDA, with some deals touching nearly 20x EBITDA.

Being a franchisor is a much more difficult game than being a franchisee, but damn those are impressive numbers!

MBA / College Programs Based Around Franchising

Overall, there are very few courses dedicated to franchising, as well as very few faculty members researching franchising.

A few institutions that do have a curriculum that sheds light on franchises are Palm Beach Atlantic’s Titus Center for Franchising , Northwood University , The Tariq Farid Franchise Institute at Babson College , and the Yum! Center for Global Franchise Excellence at University of Louisville College of Business .

To read the full case-study, click here .

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As Hooters celebrates its 40th anniversary this year, the company offers 40 royalty-free weeks to franchisees who sign agreements by Dec. 31. The leadership of the full-service casual-dining brand, which is entering its third year of growth in same-store sales, plans for ambitious domestic growth in 2023. The Hooters franchise has premium territories available around the United States.

International Operator McWin Bets Big on Burger King, Popeyes in Europe

Danielewicz is chairman of Rex Concepts, the newly created platform under McWin Capital Partners to develop Burger King in Czech Republic, Poland and Romania, and Popeyes in Czech Republic and Poland. The master franchise and development agreements call for some 600 restaurants to open in these countries over the next 10 years, scale that appears daunting before considering the experience of McWin’s founders and its leadership team.

Disclaimer: This Content is for informational purposes only, you should not construe any such information or other material as legal, tax, investment, financial, or other advice. Nothing contained on this site constitutes a solicitation, recommendation, endorsement, or offer to buy or sell any franchises, securities, or other financial instruments in this or in any other jurisdiction in which such solicitation or offer would be unlawful under the franchise and/or securities laws of such jurisdiction.

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3 Ways to Get on The Road to Franchising — And How to Find the Right Business For You Although franchising contributes significantly to the US economy, most US business schools lack dedicated franchising curriculums. These three sources will help you get started and find out which franchise is right for you.

By Alicia Miller • Apr 10, 2024

Key Takeaways

Despite franchising's significant contribution to the U.S. GDP, most business schools still do not offer dedicated franchising curriculums.
For those interested in franchising, there are several avenues to gain knowledge and insights.
A growing number of universities are beginning to offer franchising courses or concentrations.

Opinions expressed by Entrepreneur contributors are their own.

The business school I attended had no classes on franchising and, 20 years later, still doesn't. Entrepreneurship classes, yes. Finance, of course. Real estate, yes. But nothing about franchising. There were a few case studies about franchising sprinkled through marketing courses, but that was it.

It's a big miss. Franchising represents three percent of US GDP and has global reach. It's a vibrant sector in which to build a big career or entrepreneurial venture. So, what are the options to learn about franchising best practices and make smart investing choices?

Related: Considering franchise ownership? Get started now to find your personalized list of franchises that match your lifestyle, interests and budget.

Franchise industry organizations

First – start with the International Franchise Association , (IFA) both the Certified Franchise Executive (CFE) program and IFA-sponsored events. Classes are held in person and online. The IFA also offers many opportunities to learn and meet people with franchise experience . Networking at IFA events is one of the best ways to learn how others create franchising success.

There are several franchise expos around the US and around the globe where franchisors and suppliers come together to meet with prospective franchisee candidates. Most expos offer free classes and talks about various aspects of franchising, including how to choose and finance your franchise business. Walking the floor and talking to franchisors is a good way to get a sense of the breadth of options, investment ranges, and operating models .

There are myriad online resources to help with your franchise journey, besides Entrepreneur. For example, how do you know whether franchisees are satisfied with their investment, corporate management team, and the future? Franchise Business Review provides franchisee survey results.

It's important to review Franchise Disclosure Documents (FDDs) carefully, including going back several years so you can see changes over time. A great site for this is Vetted Biz , which also includes analysis and comparisons of different franchise concepts. You can also get free franchise disclosure documents from several state websites.

Even if you're not going into the restaurant business, Restaurant Business Online has excellent reporting and covers information broadly applicable to the franchise industry including regulations and consumer trends. This company primarily serves corporate users, private equity firms, and lenders, but is an excellent source of information about overall franchise industry trends and statistics.

Related: Find Out Which Brands Have Ranked on the Franchise 500 for Longest, Earning a Spot In our New 'Hall of Fame'

Franchise start-up guides

On my website, I provide a free list of suggested questions to ask franchisees to get you started. The Federal Trade Commission published a guide to buying a franchise , and several states, including California and Maryland , have published franchise-buying guides as well. They are useful resources no matter where you reside.

Check your own state's website for franchising information, business start-up guides, business licensing requirements, funding resources , state-specific regulations, and other helpful information. For example, Texas and Ohio provide small business start-up guides.

The Small Business Administration (SBA) has many helpful guides and resources, including templates to help you build your business plan. Also, remember to check your state Chamber of Commerce as well as your local Small Business Development Centers (run by the SBA) for funding options and start-up advice and assistance.

Related: Don't Make These 5 Risky Franchise Ownership Mistakes

University-level options

Many colleges and universities do not offer degrees or classes on franchising . However, a growing list of options is becoming available and more prospective franchisees are taking classes in franchising before they invest in a franchise business. Here are a few of the major ones:

Yum! Brands endowed the Yum! Center for Global Franchise Excellence at the University of Louisville (U of L), as a part of their $100 million Unlocking Opportunity diversity initiative across the world, launched in 2021. U of L is the only university with franchise certifications at the graduate, undergraduate, and professional educational levels.

The Tariq Farid Franchise Institute at Babson College provides university courses, research, and executive education on franchising. The franchising program is attached to Babson's entrepreneurship program, consistently rated as a top MBA and undergraduate entrepreneurial program.

Finally, Palm Beach Atlantic University 's franchise classes draw from its business school. According to Dr. John Hayes of the school's Titus Center for Franchising , "It is a concentration in franchising (not a major or minor) and the concentration appears on students' university transcripts. It provides the opportunity to customize what you want to study. We are working on online education options as well."

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Truth and Ethics in Franchising: A Case Study

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In this case, two franchisees provide fraudulent financial information in order to purchase their franchise. Acting as the franchisor, students must deal with this ethical issue and decide on the appropriate course of action for the business as a whole.

Case Synopsis

The franchisor/franchisee relationship is built on principles of truth and honesty. When a franchisor discovers that two franchisees (a husband and wife) lied about their financial qualifications to become franchisees, what are the franchisor’s options? Should the franchisor terminate the relationship with the franchisees and keep their $50,000 franchise fee? Should the franchisor terminate the relationship but refund all or part of the franchise fee? Should the franchisor overlook the lie but keep a close watch on the franchisees’ performance? In this case, students are asked to play the role of the franchisor and make the difficult decision.

Learning Objectives

Compare how buying a franchise unit from a franchisee differs from buying from the franchisor

Explain why trust is a critical component in the franchising relationship

Identify ethical situations franchisors confront

Develop ideas for how a franchisor can protect the system from applicant fraud even if the system is being sold by a franchisee

Franchise Company Background

Real Property Investors, Inc. (RPI) is a franchise company headquartered in Dutton, Ohio. RPI franchisees are real estate investors who buy properties, mostly private homes, condominiums, apartments, and apartment houses for the purpose of reselling or renting the properties. The founder of RPI, Bart Furman, had been a Dutton, Ohio real estate agent for many years, and a broker as well for a short period of time. In the mid-1980s, Furman decided to offer real estate investors what he described as his “personal system for acquiring real estate and building wealth.” His reputation for real estate investing had mushroomed across the USA, especially in the Mid-Atlantic region. He was known as “the investor’s investor” because he not only could teach an individual how to buy and sell investment properties, but he was a hard money lender, too. In 1988, Furman incorporated his business, Real Property Investors, for the purpose of selling franchises.

Many investors wanted to work with Furman personally and they were willing to pay substantial fees for his attention. Furman, however, was concerned about his reputation. When Furman evaluated a property to acquire it, he insisted on using “comps”. He never wanted to be characterized as a businessman who took advantage of other people. As a member of National Real Estate Investors Association (National REIA), Furman supported ethical behavior in his profession. He kept up with real estate laws and regulations and taught them as part of his workshops and eventually as part of his training for franchisees. He believed in treating customers honestly.

Furman would often describe his business as the “McDonald’s” of the real estate investment world. McDonald’s was known as an outstanding franchise opportunity and McDonald’s franchisees were known for expert business practices, high quality customer service, and clean facilities. Furman wanted to create a similar reputation for real estate investors. Ethical behavior was a requirement for anyone who joined his franchise network. Ethical behavior required truthfulness as well as following through on any commitments made by a franchisee to a customer. Ethical behavior also included following the law, including the terms of a franchise agreement. Furman’s franchise training program included a session dedicated to ethical behavior in real estate investing. As part of the training, Furman contracted with a real estate attorney to speak to his franchisees. He stressed the importance of “doing business by the letter of the law.” He often told his franchisees that there would never be a “second chance” for a franchisee who violated a real estate law, whether it was a national or local law. The franchise contract of any violating franchisee would be immediately terminated. Furman made certain that the franchise contract he used when he sold a franchise gave him the right to cancel the contract if a franchisee lied or knowingly provided misleading information.

While there were other experts around the USA teaching people how to become real estate investors, only Furman and Real Property Investors, Inc. offered franchises. More and more would-be investors wanted to join RPI and become franchisees. More and more property owners hoped to sell their properties to RPI franchisees, who quickly developed a reputation for making an honest offer and closing the deal within days, meaning that the sellers received their money in quick order. While franchisees were not required to borrow money from Furman to purchase properties, most RPI franchisees would eventually do so. Franchisees started out buying one house at a time. Some franchisees bought multiple houses monthly. Eventually, the top producing franchisees were buying more than 100 properties annually! Most franchisees who bought more than two or three properties needed to find sources of capital, which included borrowing money from RPI or other “hard money” lenders.

At the time of this story, RPI included 95 franchise locations in the United States and primarily in Ohio, Michigan, Pennsylvania, Indiana, Kentucky, Georgia, Florida and Texas. Acquiring an RPI franchise required an investment between $78,000 and $103,000, depending on the size of the territory. In addition, franchisees were required to spend at least $6,000 per month for advertising – mostly consisting of the firm’s famous TV ad. Most RPI franchisees said they invested in the business for two primary reasons:

First, to learn how to become successful real estate investors, which RPI promised to teach.

Second, because they needed a steady supply of leads from potential home sellers.

How A Franchisee Can Sell to a Prospective Buyer

In 1997, a couple, the Bowmans, were looking to buy an RPI franchise in Palm Beach County, Florida. They contacted Furman and he explained that the market was sold out, but he would introduce the Bowmans to an existing franchise in Palm Beach Gardens, William R. Nolan, who might be interested in selling his business. Nolan had purchased his franchise in 1989, was 65 years old at the time, had expressed the desire to sell so he could move back to his hometown in Michigan. Nolan operated his franchise under the name, Florida House Buyers, Inc. He quickly agreed to meet the Bowmans.

Furman was relieved that Nolan wanted to sell his franchise because Furman considered Nolan a “needy” franchisee who complained frequently. Furman also suspected that Nolan underpaid royalty dollars due to RPI, but he could not prove it. What irritated Furman most was that Nolan had on more than one occasion told a prospective franchise buyer not to buy an RPI franchise because he didn’t think it was worth the investment! Meanwhile, Furman had taught Nolan how to succeed as a real estate investor and Furman knew, based on the number of houses Nolan reported buying, that Nolan had done very well financially. Furman never openly expressed his feelings about Nolan, but members of his corporate team knew how he felt. There were even some concerns by Furman that Nolan was not always ethical in his real estate dealings. Given these circumstances, Furman already had decided not to renew Nolan’s franchise license, but he had yet to inform Nolan of that decision. RPI franchise licenses were sold for 10 years after which time they could be renewed for another 10 years. However, both franchisor and franchisee had to agree to the renewal. Furman had already decided not to renew Nolan’s license so it was fortuitous that a prospective buyer – the Bowmans – came onto the scene.

In a situation where an existing franchisee offered a franchise for sale, the existing franchisee, and not the franchisor, established the sale price for the business. At this time, the cost of a new RPI franchise was $50,000 plus required funds to advertise the business. But in a market where RPI had no additional licenses to sell, the local franchisees could establish the market price for a franchise. RPI still held the right to approve the buyer who would then become an RPI franchisee, but RPI did not get involved in establishing the sale price for the existing franchisee’s business. RPI also would not get involved in any negotiation between a franchisee and a buyer. After Furman introduced the Bowmans to Nolan, Nolan set a value for his business and eventually the two parties entered a negotiation.

Nolan made sure the Bowmans were aware that they would have to meet RPI’s requirements to officially become franchisees. But he didn’t think that would be an issue especially since Furman, the franchisor, had introduced the Bowmans to him. Would Furman introduce a prospective franchisee who he would not approve for the purchase of a franchise? Nolan didn’t think so.

Furman explained to the Bowmans that they had to complete RPI’s franchisee application, provide comprehensive financial information to establish their financial qualifications, and ultimately, complete RPI’s franchisee training program. In addition to whatever amount of money the Bowmans agreed to pay to Nolan for his business, the Bowmans also had to pay the franchise fee of $50,000 to the franchisor, RPI. In addition to the franchise fee, the Bowmans would have to demonstrate that they had at least another $50,000 to devote to working capital, which would include the initial costs for advertising the RPI business.

After several weeks of negotiation, the Bowmans finalized their deal with Nolan and submitted the franchise application with required documents to RPI. The Bowmans stated that they paid Nolan $350,000 for his franchise. The Bowmans also stated that they had additional cash assets of about $150,000 and RPI confirmed that information with the Bowmans’ bank in Florida.

RPI accepted the Bowmans’ franchise application and the Bowmans paid RPI a $50,000 franchise fee. RPI scheduled the couple for franchise training to occur at the franchisor’s Ohio headquarters for 8 days. The franchise fee was refundable up until the Bowmans completed the first 8 hours of RPI’s franchise training program. In other words, if the Bowmans decided they did not want to become franchisees of RPI, they had until the end of the first day of franchisee training to get their money refunded. However, Nolan would not be required to refund the $350,000 the Bowmans paid to him. That sale was already completed and it was between Nolan and the Bowmans and did not include the franchisor. Nolan had accepted the funds and moved back to his home state.

The Ethical Dilemma the Franchisor Confronts

On the fourth day of the RPI franchisee training program that included the Bowmans the Vice President of Operations for RPI, Lance Craven, approached Furman in his office and said there was a potential problem with the Bowmans. Craven oversaw the training program and participated as a course instructor. He said there was evidence that the Bowmans had misrepresented their financial information when they submitted it to RPI to be accepted as franchisees. While socializing during lunch on day four of training, Mrs. Bowman was overheard saying to another franchisee that she was concerned about money. “We paid too much money to the franchisee who owned our territory,” she explained. The other franchisee asked her, “How much did you pay?” and Mrs. Bowman said, “About $450,000. And that’s about all the money we have.”

When Craven overhead this discussion he knew that the Bowmans had stated they had paid $350,000 for the franchise. At the time of the sale between Nolan and the Bowmans, RPI executives including Furman and Craven were impressed by the sale price. During a meeting when it was reported that the Bowmans had paid Nolan $350,000, Furman said he was happy for Nolan, even though he didn’t particularly like him, and happier for other franchisees in the Palm Beach market because they now knew their businesses might also be worth at least $350,000. If Nolan could sell his business for $350,000, others (with comparable sales performance) could, too. This also meant that franchisees in other “sold out” markets would be able to sell their franchises for a premium. “That’s the way it should work,” Furman told his executives. “If a franchisee invests with us, we want them to be able to sell their business for more money when they decide to retire or move on.” But Craven’s information was alarming. If, in fact, the Bowmans paid $450,000 to Nolan for the franchise territory then they might not have the additional capital necessary to qualify as franchisees. The VP thought the CEO should be informed of the situation. If the CEO was going to consider voiding the Bowmans’ franchise agreement it would be better done sooner than later. RPI shared what it considered confidential information during training and once the information was shared with the franchisees it could not be recovered. That’s why RPI offered a refund of the franchise fee only through the first day of training. Beginning with the second day of training RPI shared proprietary and sensitive information related to building a business as a real estate investor. Some of the information was considered “secret” to the RPI franchise network. Once the Bowmans had this information it could not be taken back from them. They could use the information and compete with the other RPI franchisees in Palm Beach County who would then be upset with RPI for sharing information with a competitor. Of course, the franchise contract the Bowmans signed also included a “non-compete” clause, but RPI had never tried to enforce that clause. No matter how they looked at it, Craven’s news was troubling, and Furman had to make a decision.

After hearing from Craven, Furman decided to meet with the Bowmans. He wanted to meet immediately but it was already late afternoon by the time Craven shared the news and the franchisees in training had all returned to their hotel for the evening. “Get word to the Bowmans tonight at their hotel that they need to come to my office upon arrival tomorrow at headquarters,” Furman instructed Craven.

The next morning the Bowmans entered Furman’s office and they were visibly uneasy. Furman was not his friendly self. He was now in business mode. He had spent the evening thinking about his options, none of which was good. He hated the thought that franchisees had lied to him. A franchise relationship is built on trust between franchisor and franchisee. If Furman thought he could not trust a franchisee he’d rather not have that franchisee in his business network. His first mission during the meeting with the Bowmans was to get the truth from them. How much did they pay Nolan? If it was any number other than what they reported, Furman would have to make a difficult decision, one he’d never made before. The way he saw things, if he found out the Bowmans had lied, he had three choices:

Void the Bowmans’ franchise agreement and keep the $50,000 franchise fee.

Void the Bowman’s franchise agreement but refund all or part of the $50,000 franchise fee.

Let the Bowmans complete franchise training and if they succeeded, they would become franchisees. But put them on formal notice.

Furman didn’t like any of the choices. He hated the idea of what his decision might mean for the Bowmans. The franchise agreement was very clear. Furman had the right to void a franchise agreement if a franchisee committed fraud and it was fraudulent for the Bowmans to misrepresent the sale price they paid to Nolan as well as the financial information submitted to RPI. Furman also had the right to keep the $50,000 franchise fee especially since the Bowmans were still in training after the first day. He could send the Bowmans home with nothing – they would no longer be RPI franchisees, and they would forfeit their $50,000. And even if Furman graciously decided to refund all or part of the franchise fee, which he did not have to do, he knew that Nolan was not going to refund the money the Bowmans paid him – that amount was either $350,000 or $450,000. The Bowmans would lose that money! But if Furman decided to let the Bowmans complete franchise training and graduate as full-fledged franchisees in the Palm Beach County market, they had to meet the advertising requirements. If they had less working capital than they had reported at the time of becoming franchisees, they would be short of cash, and if they could not meet their advertising requirements that would jeopardize the performance of other franchisees in the Palm Beach County market. Jeopardizing the work outcomes for other franchisees was not something Furman wanted to think about.

Franchisees depended on each other to pay the minimum advertising requirements in a market. Franchisees depended on RPI to verify that a franchisee had the money to invest and to pay for ongoing advertising. Doing less advertising would result in fewer opportunities to buy houses for all of the franchisees. Fewer transactions not only negatively impacted the franchisees, but it also negatively impacted RPI, which collected a royalty fee every time a franchisee purchased a house. Franchisees could be angered knowing that the Bowmans were not paying their fair share of advertising. Why did RPI allow that to happen?

At one point Furman worried that the other franchisees might turn on RPI. The situation was not going to be resolved simply by voiding the franchise contract and sending the Bowmans home with nothing. The Bowmans already had benefited from the four days of training they had received. They were given information and insights to the success of RPI franchisees. They had been exposed to RPI’s “secret sauce,” so to speak, and once it was shared with them it could not be “un-shared.” If the Bowmans returned to Palm Beach County and decided to compete with RPI’s local franchisees, Furman imagined the local franchisees might have a legal case to bring against him and his company. He had never been sued by a franchisee and he wanted to avoid a lawsuit at all costs. Still, a decision had to be made. He couldn’t just ignore it. He prayed that Craven’s information was wrong. Or if it was correct, and the Bowmans had paid $100,000 more than reported, perhaps the Bowmans would have access to additional working capital, and they could meet the advertising requirements. It would be easier, Furman thought, to deal with them lying about the sale amount if they could still meet the requirements of the franchise agreement.

When Furman saw Mrs. Bowman sit down across from him and immediately start sobbing, he knew the worst was about to come. Furman broke the ice. He said, “Good morning” and he slightly smiled. Franchisees knew Furman had a friendly personality and that’s part of what endeared him to them, but he was troubled as he began to speak to the Bowmans. He slowly explained what he had heard without revealing all the details of who reported the information to him. When he finished talking, he looked silently at the Bowmans and then said, “Please tell me what happened.”

Mr. Bowman immediately admitted the information was true and justified himself. “The franchisee we bought the territory from, Nolan, told us not to tell you the real purchase number.”

“Why would he do that?” asked Furman.

“I don’t know,” Mr. Bowman replied. “But Nolan knew we would not meet your financial requirements to buy the franchise if we revealed how much we actually paid and how much working capital we actually had left.”

“So you lied?” asked the CEO.

Mrs. Bowman’s sobbing intensified and she said, “Please don’t take the franchise away from us. We will lose all our money.”

“I understand that,” Furman replied, while speaking slowly in hopes of not agitating Mrs. Bowman all the more. “But I’d like you to understand that franchising is built on a trust relationship. If you lie to us about how much you paid for another franchisee’s business, why would we think you’d tell us the truth about anything else? We’re always going to be thinking we can’t trust you. So when you report activity about your business, or you pay your royalties, or you tell us what you’re going to do, we’re always going to suspect that you are not telling the truth. We’re always going to think you’re hiding royalties from us. Do you understand that?”

The Bowmans both responded yes and apologized. “I wouldn’t normally lie about something like this,” said Mr. Bowman, “but we want to get into this business so badly that I was willing to lie in this situation. Besides, my wife’s father is about to give us $250,000 and so we’ll have more than enough money to get our franchise started.”

Furman perked up at that information. “When are you going to get this money?”

Mrs. Bowman said, “It’s not for sure, but we think we’ll get it in thirty days.”

“So you don’t know that you will get it?” asked the CEO.

“No,” said Mrs. Bowman. “I talked to my father about it and told him that I needed some money and we talked about $250,000. That would give us money to invest in our franchise and also to pay some bills that we have. He said he thought he could get the money to us in about forty-five days and that was two weeks ago.”

“What are you going to do if you don’t get the money?” the CEO asked.

“I don’t know,” cried Mrs. Bowman. “But we can’t afford to lose half a million dollars. Please.” She looked at her husband and said, “We should not have done this.”

“You should not have done what?” asked the CEO.

Mr. Bowman looked at his wife and said, “It’s going to be okay.” Then he told Furman, “My wife is upset but it’s going to be okay. If her father doesn’t give us the money we will get it another way. I’ve been in the real estate investment business for several years already and I know how to make some quick money. You know that I own some rental properties and I could sell them to raise some cash. It will be okay.”

“Did you report those rental properties in your financial statement?” the CEO asked.

“Yes, of course. I don’t make it a habit to hide information from people in a situation like this. I’m an honest businessperson.” Said Mr. Bowman.

The CEO looked at him for a long moment and said, “Franchising doesn’t work, or doesn’t work as well, unless both the franchisor and the franchisee are honest business people. Honesty is very important to me personally and professionally. We have a large network of real estate investors and it’s important that all of them operate ethically at all times. That means telling the truth and doing what’s right all the time. One franchisee’s dishonesty can negatively impact other franchisees. If the marketplace begins to think that we are not honest businesspeople our brand name is in trouble. This is a very serious matter. Your actions could jeopardize other franchisees in Palm Beach County and I’ve got to take all of that into consideration. You’ve put me in a very bad situation.”

“Are you going to take away our franchise?” Mrs. Bowman pleaded.

“I don’t know,” Furman said.

“Please don’t do that,” she continued. “We’ll do a good job. We already know the other franchisees in the market, and we can all work together. We know how to buy and sell properties. We’ll make you a lot of money if you give us a chance.”

“Mrs. Bowman, I appreciate that, but making a lot of money isn’t what this is all about. We don’t sell franchises just to make money. We have an obligation to each other and to our customers to do the right thing. Doing the wrong thing and making a lot of money just doesn’t work for me.”

Furman continued by telling the Bowmans that he was disappointed that they had put him in a situation where he was being forced to make a difficult decision. “I do thank you for being honest this morning and I appreciate your time. I wish we didn’t have to meet like this.” The CEO then went on to deliver the decision that determined whether or not the Bowmans would continue to be HVA franchisees.

This case study reveals the importance of truth in franchising and how failure to reveal truthful information required by a franchisor can jeopardize a new franchisee’s relationship with the franchisor. In this case the franchisees could lose their franchise license and if that occurs the franchisees will forfeit not only their franchise fee but additional money they paid to acquire an existing franchisee’s business. Upon selling an existing franchise business, the selling franchisee has a lot of leverage, but the ultimate decision to sell or not to sell almost always rests with the franchisor. An existing franchisee cannot control who a franchisor selects as a succeeding franchisee. It’s important for franchisees who acquire an existing franchisee’s business to follow the franchisor’s requirements as outlined in the Franchise Disclosure Document and then provide truthful information about the terms of the sale consummated with the existing franchisee. If discovered, dishonest answers could result in the franchisor denying a sale or voiding the sale after it was agreed upon.

Questions for Discussion

If you were the CEO, what decision would you make to resolve the matter? Explain the decision. Describe in detail why you made that decision.

Where did this matter go wrong? Who’s to blame? And what, if anything, could have occurred to prevent this type of situation? What, if anything, could the franchisor have done to prevent this situation?

List and describe the consequences that would occur if the CEO decided to terminate the Bowmans’ franchise license. What are the consequences for the Bowmans? What are the consequences for RPI?

What responsibility, if any, does the franchisee (Nolan) who sold his business to the Bowmans share in this matter? Can RPI or the Bowmans take any action against him? Can he be held accountable for any of the consequences?

If the Bowmans remain franchisees of RPI, how do you think you, as an executive of RPI, would perceive and treat the Bowmans going forward? If you’re the CEO or the Training Director or the Operations Director would you trust them? When they answer a question, or work with a customer, or pay their royalty . . . would you trust them? If yes, present your rationale and elaborate. If no, present your rationale and elaborate.

How do franchisor and franchisee value and maintain a relationship when one party doesn’t trust the other?

As the CEO of RPI part of your responsibility is to protect the company’s intellectual property. Intellectual property was shared with the Bowmans during franchise training. If the decision is to terminate the Bowmans’ franchise license and prevent the Bowmans from continuing with training, what steps would you take to protect RPI’s intellectual property?

When the Bowmans purchased the franchise from Nolan, they received confidential information from that franchisee. For example, the franchisee gave them his local database of buyers and sellers. The information also included contact information and relationship details about vendors/suppliers of RPI. The sale also included some leads – people who had contacted the existing franchisee to sell their house – the Bowmans would have the opportunity to follow up with those leads and acquire properties. If the Bowmans are not franchisees of RPI, but they have access to this information and to these opportunities, does that present challenges for RPI? Answer that question in detail.

Submitted : October 01, 2022 MDT

Accepted : January 01, 2023 MDT

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Franchising Business, Case Study Example

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Franchising Business Case Study

According to the case study, John is faced with two major decisions to make. His wife and he have differing preferences on which choice he should take. John, based on his past performance feels that joining the franchise-consulting firm would be a viable option, which will properly reward him for the great efforts he invests in his work. His wife Joan on a differing pinion feels that accepting the option from their church friend Phil would be an excellent opportunity for John to practice in an area he began with and he understands well given that it forms a major part of his past.

In a perspective approach, the two can consider the various options available for them joining these jobs. These can be best analyzed through a detailed analysis of the consequences relating to each of these jobs. Through this a substantive solution will be found that will benefit both the parties, especially given the far that they have come professionally. The options and consequences are as presented below.

Franchise consulting firm

Franchise consulting firm has a number of advantages and these would benefit him professionally in a number of ways. The following are some of the advantages accrued to this job. First, while performing this business, John will have a number of times to perform other tasks that relate to his career. He can run and manage other businesses as well as engage in the consultancy business (Sherman, 2011, p.112). This would be a good way of generating income from both sides hence opening more financial avenues for him.

Secondly, the franchise business has an advantage of less work at job. The job of consultancy entails giving advice to people willing to venture into the franchise business. Taking up this option will give him an advantage of just advising people. The input here is low and he will have a lot of relief and time to relax after many years of practice in the job. This can give him more time to focus on other things like their family issues as well as their other business ventures (Kaufman, 2009, p.73).

As an advantage on his side, the franchise consultation business will help him improve his knowledge and skills regarding the franchising business. Being a consultant will give him an advantage of advising people with various needs on ways to make their franchise businesses successful. This in turn will give him sufficient exposure to various things related to the franchising business. Similarly, he will develop an inner understanding of venturing into various franchising businesses and the salient ways to make them prosper.

As a franchiser, he will have an advantage of carefully studying the market and gaining an understanding of the market trends that are good. In this way, he can choose to invest on a venture that will make him more successful. Market knowledge is very important in business and being in a position to tell which the best franchise venture is in the market can make one in a very successful position (Sherman, 2011, p.120).

On the other hand, despite the various advantages attached to the franchising business, there are a myriad of disadvantages to it. For instance, the franchising consultancy job may limit him to only offering consultancy functions hence make him abandon other sectors to which he is qualified to work. At his level, John has developed multi skills in the franchising business hence he needs to implement them fully. Getting absorbed into the consultancy job would limit him from performing other functions especially in situations where there are many people doing consultation.

In addition, though the consultancy job may be a viable option, John may not be assured of getting a consistent income especially from the fact that he will be paid by a portion of profits got from the other consultants. This has an implication that his income will come majorly from the profits made out of consultation. One thing about the consultation job is that it is not consistent and it can perform well at one time and change at a different time. This can affect his income despite the company being a big one.

Relatively, if John chooses to accept the appointment, he will be forced to move out of Texas, a place he had longed to live in after getting his second job and relocate to Denver (Shook, C & Shook, R, 2009). This would be a disadvantage to the family since they would be forced to leave their children in Texas who are still in college. This would not be an idea that the children would appreciate especially given the fact that they have been living with their parents since their childhood.

Phil business venture

In this case, a church friend, Phil approached John to involve in a franchise investment. Phil had acquired franchise rights in that state and offered to support John and the family in setting up and running successful franchise for an automotive repair. The following are some of the advantages attached to this.

John has a background of automotive repairs and placing him in an automotive franchise business would help him deliver the best of his abilities. Having worked at his stepfather’s garage for some time after high school, John acquired knowledge and skills relating to maintenance of such. This would place him in the right position to form and manage other new upcoming franchises within the region. A combination of this knowledge with the excellent franchising skills acquired over time would make him get excellent results in the business.

At the same time, John has excellent skills in managing and running franchising businesses, placing him in such a position would make him offer the best of his knowledge. From his experiences in handling franchise businesses, he probably developed the salient skills that would enable him deliver exemplary results.

Given his operations and existence in the franchising market within Texas, John is adequately conversant with the market trends regarding this business. Similarly, he is aware of various potential competitors and their subsequent weakness (Kaufman, 2009). This places him in a position to institute market strategies that would help him out do the competitors.

In addition, Phil promised to offer them full support while venturing on the franchise business. They will therefore incur little cost in terms of setting up and running the business. This is good since their input would only be professional rather than financial as a result they will encounter little challenges in running the business (Shook & Shook, 2009).

Phil has a good reputation of being an excellent businessperson hence forming partnership with him would open John and the wife new avenues and opportunities to venture. As a result, they would reach their points of actualization faster than when they work in other places.

Despite these advantages, there are other few disadvantages that may be accrued to accepting Phil’s proposal, some of these would include lack of total ownership of the business; the business and all the rights have been registered under Phil’s name hence giving him all the rights to dictate how the business is managed (Siegel, 2010). In cases of controversy in opinions, management of the business may not be easy since one is a professionals and the other is an employer.

Picking either of the above-mentioned options may be an advantage to John’s family, however, they need to pick an offer that is promising and will benefit the family equally. Joining the consultancy firm may be a good idea, but it has many disadvantages hence the entire John’s family may not adopt it willingly. At the same time, the job pay would do not appear consistent especially in the low job season since it is based on profits. The Phil’s option is a good one since it has a professional forward mobility (Kaufman, 2009, p.77). John and the family can join it and be sure to excel in their professional life. In addition, they are to begin at no expense since Phil would cater for all the expenses. This would not only give them an easy way but also a better continuity of their professional career given that their pasts have been full of franchising professionalism. Moreover, he would be placed in an area that he initially had many interests for, automotive. Therefore, in my opinion, the way forward for this couple is to choose the Phil’s option.

Kaufman, D. J. (2009). Understanding franchising: business & legal issues . New York: Practising Law Institute.

Sherman, A. J. (2011). Franchising & licensing two powerful ways to grow your business in any economy (3rd ed.). New York: AMACOM.

Shook, C., & Shook, R. L. (2009). Franchising: the business strategy that changed the world . Englewood Cliffs, N.J.: Prentice Hall.

Siegel, W. L. (2010). Franchising . New York: Wiley.

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A popular YouTuber's negative video of Humane's AI Pin raises questions about critical reviews in the age of innovation

This post originally appeared in the Insider Today newsletter.
You can sign up for Business Insider's daily newsletter here .

Hello there! If you're struggling to decide the foods worth buying organic, best-selling author Michael Pollan has some suggestions for the ones worth splurging on to avoid harmful chemicals .

In today's big story, we're looking at a critical tech review that caused a bit of a stir on social media .

What's on deck:

Markets: Goldman Sachs quiets the haters with a monster earnings report .

Tech: Leaked docs show one of Prime Video's biggest issues, forcing customers to abandon shows .

Business: The best bet in business these days? Targeting young men who like to gamble .

But first, the review is in!

If this was forwarded to you, sign up here.

The big story

Up for review.

"The Worst Product I've Ever Reviewed… For Now"

Marques Brownlee, the YouTuber better known as MKBHD, didn't mince words with the title of his review of Humane's AI Pin .

In a 25-minute video , Brownlee details all the issues he encountered using the AI device. (Spoiler alert: There were a lot.)

Brownlee's review aligns with other criticisms of the device . But not all of those came from someone with as much sway. His YouTube channel has more than 18 million subscribers.

One user on X pointed that out , calling the review "almost unethical" for "potentially killing someone else's nascent project" in a post reposted over 2,000 times.

Most of the internet disagreed, and a Humane exec even thanked Brownlee on X for the "fair and valid critiques."

But it highlights the power of Brownlee's reviews. Earlier this year, a negative video of Fisker's Ocean SUV by Brownlee also made waves on social media .

Critical reviews in the age of innovation raise some interesting questions.

To be clear, there was nothing wrong with Brownlee's review. Humane's AI Pin costs $700. Watering down his review to ease the blow would be a disservice to the millions of fans relying on his perspective before making such a significant purchase.

Too often, companies view potential customers as an extension of their research and development. They are happy to sell a product that is still a work in progress on the promise they'll fix it on the fly. ("Updates are coming!")

But in a world of instant gratification, it can be hard to appreciate that innovation takes time.

Even Apple can run into this conundrum. Take the Apple Vision Pro. Reviewers are impressed with the technology behind the much-anticipated gadget — but are still struggling to figure out what they can do with it . Maybe, over time, that will get sorted out. It's also worth remembering how cool tech can be, as Business Insider's Peter Kafka wrote following a bunch of trips in Waymo's software-powered taxis in San Francisco . Sure, robotaxis have their issues, Peter said, but they also elicit that "golly-gee-can-you-believe-it" sense.

As for Humane, America loves a comeback story. Just look at "Cyberpunk 2077." The highly anticipated video game had a disastrous launch in 2020 , but redeemed itself three years later, ultimately winning a major award .

Still, Humane shouldn't get a pass for releasing a product that didn't seem ready for primetime, according to the reviews.

And its issue could be bigger than glitchy tech. Humane's broader thesis about reducing screen time might not be as applicable. As BI's Katie Notopolous put it: " I love staring at my iPhone ."

3 things in markets

1. Goldman finally strikes gold. After a rough stretch, the vaunted investment bank crushed earnings expectations , sending its stock soaring. A big tailwind, according to CEO David Solomon, is AI spawning " enormous opportunities " for the bank.

2. Buy the dip, Wedbush says. Last week's drop among tech stocks shouldn't scare away investors , according to Wedbush. A strong earnings report, buoyed by the ongoing AI craze, should keep them soaring, strategists said. But JPMorgan doesn't see it that way, saying prices are already stretched .

3. China's economy beat analysts' expectations. The country's GDP grew 5.3% in the first quarter of 2024, according to data published by the National Bureau of Statistics on Tuesday. It's a welcome return to form for the world's second-largest economy, although below-par new home and retail sales remain a cause for concern .

3 things in tech

1. Amazon Prime Video viewers are giving up on its shows. Leaked documents show viewers are fed up with the streamer's error-ridden catalog system , which often has incomplete titles and missing episodes. In 2021, 60% of all content-related complaints were about Prime Video's catalog.

2. Eric Newcomer is bringing his Cerebral Valley AI Summit to New York. The conference, originally held in San Francisco, is famous for producing one of the largest generative AI acquisitions ever. Now, it's coming to New York in June .

3. OpenAI is plotting an expansion to NYC. Two people familiar with the plans told BI that the ChatGPT developer is looking to open a New York office next year. That would be the company's fifth office, alongside its current headquarters in San Francisco, a just-opened site in Tokyo, and spots in London and Dublin.

3 things in business

1. America's young men are spending their money like never before. From sports betting to meme coins, young men are more willing than ever to blow money in the hopes of making a fortune .

2. Investors are getting into women's sports. With women like Caitlin Clark dominating March Madness headlines, investors see a big opportunity. BI compiled a list of 13 investors and fund managers pouring money into the next big thing in sports.

3. Bad news for Live Nation. The Wall Street Journal reports that the Justice Department could hit the concert giant with an antitrust lawsuit as soon as next month. Live Nation, which owns Ticketmaster, has long faced criticism over its high fees.

In other news

Blackstone hires Walmart AI whiz to supercharge its portfolio companies .

Taylor Swift, Rihanna, Blackpink's Lisa: Celebrities spotted at Coachella 2024 .

NYC's rat czar says stop feeding the pigeons if you want the vermin gone .

A major Tesla executive left after 18 years at the company amid mass layoffs .

Some Tesla factory workers realized they were laid off when security scanned their badges and sent them back on shuttles, sources say .

New York is in, San Francisco is very much out for tech workers relocating .

AI could split workers into 2: The ones whose jobs get better and the ones who lose them completely .

Oh look at that! Now Google is using AI to answer search queries .

A longtime banker gives a rare inside look at how he is thinking about his next career move, from compensation to WFH .

Clarence Thomas didn't show up for work today .

What's happening today

Today's earnings: United Airlines, Bank of America, Morgan Stanley, and others are reporting .

It's Free Cone Day at participating Ben & Jerry's stores.

The Insider Today team: Dan DeFrancesco , deputy editor and anchor, in New York. Jordan Parker Erb , editor, in New York. Hallam Bullock , senior editor, in London. George Glover , reporter, in London.

Watch: Nearly 50,000 tech workers have been laid off — but there's a hack to avoid layoffs

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Case Study: How Aggressively Should a Bank Pursue AI?

Thomas H. Davenport
George Westerman

A Malaysia-based CEO weighs the risks and potential benefits of turning a traditional bank into an AI-first institution.

Siti Rahman, the CEO of Malaysia-based NVF Bank, faces a pivotal decision. Her head of AI innovation, a recent recruit from Google, has a bold plan. It requires a substantial investment but aims to transform the traditional bank into an AI-first institution, substantially reducing head count and the number of branches. The bank’s CFO worries they are chasing the next hype cycle and cautions against valuing efficiency above all else. Siti must weigh the bank’s mixed history with AI, the resistance to losing the human touch in banking services, and the risks of falling behind in technology against the need for a prudent, incremental approach to innovation.

Two experts offer advice: Noemie Ellezam-Danielo, the chief digital and AI strategy at Société Générale, and Sastry Durvasula, the chief information and client services officer at TIAA.

Siti Rahman, the CEO of Malaysia-headquartered NVF Bank, hurried through the corridors of the university’s computer engineering department. She had directed her driver to the wrong building—thinking of her usual talent-recruitment appearances in the finance department—and now she was running late. As she approached the room, she could hear her head of AI innovation, Michael Lim, who had joined NVF from Google 18 months earlier, breaking the ice with the students. “You know, NVF used to stand for Never Very Fast,” he said to a few giggles. “But the bank is crawling into the 21st century.”

Thomas H. Davenport is the President’s Distinguished Professor of Information Technology and Management at Babson College, a visiting scholar at the MIT Initiative on the Digital Economy, and a senior adviser to Deloitte’s AI practice. He is a coauthor of All-in on AI: How Smart Companies Win Big with Artificial Intelligence (Harvard Business Review Press, 2023).
George Westerman is a senior lecturer at MIT Sloan School of Management and a coauthor of Leading Digital (HBR Press, 2014).

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