Tag Archives: franchisees

The Importance of Diversification

Posted on by

Many feel that if managed properly, owning a diverse set of businesses can help insulate against business peaks and troughs in the market. Many wealth planners will generally present diversification models to allow the purchase of multiple asset classes such as stocks, bonds, and mutual funds. Diversification in the franchise industry is different. Franchisees can diversify within a particular industry by acquiring different brands.  Diversifying within the same industry, such as the buying several different restaurant brands, still allows the franchisee to apply the same basic infrastructure to their business.

This strategy of franchising helps spread the risk from a franchisee’s perspective. If the demography of existing brands and new brands are vastly different, there becomes an opportunity to cross-market both products and knowledge. Aziz Hashim, the president and CEO of NRD Holdings, LLC, highlights a smart way to diversify in his recent piece in Franchising World about this topic, stating that “The most effective way to execute a diversification strategy is to identify opportunities in new sectors where the operational complexity is generally lower than the existing operations so as to not dilute the franchisee’s time and focus, where at least some existing infrastructure can be leveraged and ideally where there are natural synergies through complementary service offerings and similar demographic.” Complementary service offerings can play a key role in expanding your opportunities and create growth.

Do you own a diverse set of businesses? We would love to hear feedback from you!

Power to the People?

Posted on by

Lawmakers in Maine, California, Pennsylvania and Massachusetts have introduced bills that would give franchise owners a lot more leverage. These new rights and options would offer new opportunities to franchisees, including allowing them to join and support franchisee associations, as well as make renew agreements with their franchiser under the current terms much easier. While there are mixed opinions on the legislation, it seems many are in favor of the new bill giving franchisees more power in their businesses. Others have issues with the bills, feeling that giving franchises more freedom could potentially “tarnish the brand.”

Maine’s new legislation bill is perhaps the most far-reaching. LD 1458, which includes a series of big stipulations, if passed, could do the following:

  1. Allow franchisees to close their stores between 10 p.m. and 6 a.m.
  2. Let franchisees renew their licenses without an increase in royalties or new fees
  3. Give franchisees the power to set their own prices on products and services

The new laws had me question what might be empowering this recent movement. Perhaps, at least in part, the desire for more flexibility for individual franchisees may be fueled by the fairly recent local movement in most communities. Locality is becoming highly valued, in terms of sourcing (ex: food) and workers. People want Joe down the road running his frozen yogurt restaurant, not the frozen yogurt’s corporate headquarters. Secondly, I think that the internet may play an influential role. Today, franchisees are able to communicate more effectively than they were a decade ago because of the rise of social media. Accessibility to one another thoughts and ideas are bringing people closer, and therefore strengthening their case.

How do you feel about the proposed legislation? Leave your comments below!