Owning and capitalizing on a franchise is certainly an appealing prospect. Now more than ever, I am talking with people who feel stuck in a corporate environment that is so focused on everything except the customer and how to serve them better. Are you one of these people? Do you feel that the influence around you is more negative than positive? Do you find it appealing to build your own business and your own culture within it? Franchising can be a good place to start.
But as you’ve likely discovered, not all franchises are created equal. Some come with stronger brand recognition and a better reputation. What’s more? Some franchises come with stronger networks.
Just as important as learning the business model and reputation of your future franchise is learning what kind of network your franchise will have now—and how it may develop in the future. Good franchisors understand that being selective when approving or onboarding a new franchisee is critical to building a quality organization. But you get to be just as discerning—and the freedom you can get as a result is unbelievably significant.
The size and quality of the franchisees who are part of your franchise network determine the value of the network. Also, the value of the network may translate into the value of your business when it comes time to sell.
The Network Effect
The Network Effect boils down to one overarching concept: That the increase in the number of people or participants improves the overall value of a particular good or service. The advent of the internet was a good example of this. At first, there were only a few users on the internet, as it didn’t present much value to anyone outside of the military or scientific research facilities. In fact, when the internet first began in 1991, there were only six countries that had more than one internet user per 100 people.
But as more and more consumers began to log on, more content was produced. As a result, websites continued to develop and improve. This attracted more users to connect or conduct business via this new platform. The internet is a prime example of the network effect. Even today, as the internet takes on more traffic, it also offers more value.
We also see the network effect via social media platforms. These social media sites and apps actually have a two-sided network effect, because users can connect with their friends, colleagues, and favorite brands, and advertisers can leverage the power of these platforms to distribute content to their target audience in one place. To make the most of the network effect though, social media platforms have to maintain their user quality to attract more valuable users and more advertisers.
How the Network Effect Impacts Franchising Opportunities
If you are evaluating prime, top-level franchise opportunities, you likely already know that these brands are very selective about who they let into their franchise system; they build their own Network Effect by first selecting driven, passionate, qualified individuals to be franchise owners. These people then follow a system to create leverage in marketing efforts, collective knowledge, and best practices. This amounts to more people doing the same things, and as a result, everyone grows faster and better together. That is a powerful network in motion.
In short, not only does the franchise’s brand reputation enhance the valuation of a franchise, but the network of franchisees can also grow a brand’s valuation as well.
When researching the right franchise for you, it’s wise to talk to the sales team about the opportunity and learn from their insights, but it’s just as important to talk with individual franchise owners to discover more details about what makes the brand tick. Why is this? You want to understand the kinds of people that work within the franchise network and how they might enhance the franchise’s valuation—which is important to the success of your franchise and especially important when it comes time to sell.
The value of your franchise increases when the number of franchise owners is similarly increasing. But also, the value of the brand goes up based on the quality of the franchisees in the system.
If you are looking for a franchise with great future brand recognition to take advantage of the network effect, this doesn’t always mean going with the biggest, most recognizable brand. You may want to look for an emerging brand over an established brand if the emerging brand has a leadership team with a successful track record in building a franchise, is being highly selective in who they accept as franchisees, and also if the brand is growing at a rapid rate.
You can be selective about which franchise brand you choose, finding a brand that has:
- A propensity for high brand value
- A positive network effect
- Positive brand recognition
Looking at these factors can help you find a franchise that doesn’t just have a good business model. You can also get a good idea of where the brand is going and how they are going to get there.
Franchising to Network
The network effect is real, and it can have immense power on your franchise location or store if many people are lifting the brand all at the same time. After all, that’s part of the appeal of owning a franchise over an independent business—you’re buying into something bigger than yourself: A network. That network should be something you are thinking about when evaluating a franchise brand to become part of.
Your franchise network can be a powerful tool. To learn more about this, and about the benefit of leveraging the power of franchising, let’s talk. Connect with me today, and let’s discuss your future franchise and your future network.