Invincible Franchises Face Tough Challenger

franchise-net.com:

Franchising has had an unquestionable impact on many countries economies and is widely acclaimed for its contribution to GDP, retail sales, job creation and training. Many chain operations utilising franchising have grown large franchise networks, and some global companies like McDonald’s (with 25,000+ restaurants in 119 countries), Subway, Blockbuster and Century 21 have reached “King Kong” or invincible proportions – or so we may believe, given their level of size and brand awareness.

This perception of invincibility is, however, misplaced. Indeed, the business environment facing most companies is actually exceedingly tough and challenging, and some fundamental changes to franchise business concepts have been made. There are several reasons or factors for this situation. This article explores four factors (namely, competition, technology, customer needs and the legal environment) that are currently providing franchise companies with the impetus to undertake substantial change.

Competition is intensifying in many sectors. Perhaps nowhere is competition more prevalent than the market for fast food – which also happens to be where the greatest brands in franchising preside. As illustrated with Domino’s recent entry into the New Zealand pizza market, increased competition generally means less sales and price wars develop as companies attempt to protect and/or build market share. Competition based on price, however, is rarely productive, and inevitably results only in an erosion of profit and investor patience. Continue reading.

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