As I understood the world, the value in a franchise lies in the strength of the brand, the reliability and consistency of the product or service, or some sort or proprietary knowledge or skill. Think of the quality of food served at a McDonald’s – not great, but consistent whether you are ordering a Quarter Pounder in Boksburg or Beijing. Or The Colonel’s 13 secret herbs and spices – something you can only get at KFC.
Looking closer to home, the value in a brand was demonstrated by Famous Brands recent acquisition of Mugg & Bean for R104 million, adding to their portfolio of existing brands such as Steers, Wimpy, Debonairs, Fishaways, and House of Coffees.
That however out the way, back to my question. Is everybody franchising everything nowadays? I recently took a trip to the local mall and came across a new business that had opened in the car park, 082CARWASH, along with a huge advert proclaiming ‘franchises now available’.
Now I am sorry, but where is the intellectual property in washing a car? And why would I pay a R200,000 premium when starting my car wash business to use this brand?
It seems to me, that everyone is jumping on the franchise bandwagon, opening one business and then trying to sell franchise opportunities. In my eyes, a potential franchisee is paying a premium price to someone with an unproven business model who happened to think of a cool name (does dot com ring a bell?).
Let me know – would you be willing to pay a substantial amount of money to a stranger to brand your business something like Slip No More, JG Electronics, Multi-Clean Services, Recon Batteries, Blue Chip Lubricants, or VoidCon? Thought not.