4. Development of franchise infrastructure

The franchise infrastructure consist of franchisor’s organization itself, arranged supply chain, marketing channels, customer support centers, IT infrastructure and all other elements that are necessary for both franchisee’s units and whole franchise network to function properly. As you can see, franchise infrastructure is related to “know-how” and services provided by franchisor to franchisees. You must build such franchise infrastructure that would enable franchisor to implement its commitments to franchisees and empower franchisees to serve their clients. Development of franchise infrastructure is not a finite process. You must continuously improve franchise infrastructure by adjusting it to ever-changing market conditions and needs of franchisees so it could become the source of sustainable competitive advantage.

During franchisor’s business planning stage, you were supposed to design main elements of the franchise infrastructure and outline the plan for their development. Now it is the time to revise, confirm and execute your plans. There are three main parts constituting franchise infrastructure:
 

  • Franchisor’s organization. To build a sustainable and successful franchisor’s business you must create a separate company or strategic business unit (SBU) that will manage the development of this new business. In the beginning of the franchisor’s operation, such company or SBU is usually very small and closely intertwined with the parent company. With the growth of franchise network, the franchisor’s organization will also grow — the number of employees will increase and a unique culture will emerge in it — and it will become ever more remote from the parent company. The particularities of the creation of the franchisor’s organization will depend on the provisions of the franchise concept and franchisor’s business strategy. However, any franchisor’s organization from its first days must have all attributes of a business organization – vision and mission, values and culture, goals and action plans, organizational structure and employees, products and services, processes and IT systems, tangible and intangible assets, budgets and allocated financial resources, etc. It is important to emphasize, that if you fail to create a fledged franchisor’s organization and do not allocate resources needed for its operations, you cannot expect that this organization will enable you to create a sustainable and successful franchisor’s business.
     
  • Unit support infrastructure. This infrastructure includes elements, which are necessary for enabling franchisees to run their units successfully and serve end-customers in accordance with the franchise standards. Elements of Unit support infrastructure can vary in different franchise networks depending on the franchised business model. Among these elements, you can often find arranged supply chain, centralized marketing and customer relationship management, IT systems, R&D activities, etc. Elements of the Unit support infrastructure might be proprietary to franchisor or outsourced. As a rule of thumb, larger and more sophisticated Unit support infrastructure enables franchisor to provide franchisees with more value and to create stronger “lock-in” effect, however it is more pricy to maintain too. In most cases, prior to launch of franchisor’s business the prospective franchisor has an already operating infrastructure supporting its own units. In such case, it is likely that first franchisees, operating in the same markets as franchisor’s own units, will simply use the existing infrastructure. However, in new markets, where the franchisor does not have its own or franchised units, such infrastructure will have to be created from scratch.
     
  • Network management infrastructure. The ultimate goal of this infrastructure is ensuring continuous and successful functioning of the franchise network and the meeting of the franchisees and franchisor’s needs. Network management infrastructure must address such areas as accountability of franchisees, quality control and its constant improvement, internal communication, information management, IT management, providing “know-how” and assistance to franchisees, supporting franchisees in selling or transferring their business, etc. In the beginning of the franchisor’s business, a typical franchisor does spend too much time on procedures and tools for management of the network. While the franchise network connects a small number of franchisees, the franchisor’s employees are able to handle them without any additional processes or standards. However, with the growth of the franchise network, the need for the systemic management of the franchise network increases. When the franchisor’s business grows, not only the scale of existing challenges increases but also new challenges arise. The franchisor should respond to the challenges caused by the growth of the franchise network by developing network management methods and technological solutions, which are the elements comprising the Network management infrastructure.
     

When finished with development of initial franchise infrastructure you are almost done with initial building franchisor’s business. Now the time has come to “translate” all strategic decisions and franchise provisions into legal language by creating franchise legal tools. You can read more about development of legal base here >>>>

 

  • Check our presentation about creating a franchisor's business here >>>>
  • Download the e-book “Franchisor's business: the beginning” here >>>> 
  • If you have any question, fell free to contact us here >>>>

 

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