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To franchise or not?

Saturday, February 24, 2018

A franchise is defined as the right or license granted by a company to an individual or group to market or produce its products or services in a specific territory.

The idea has surfaced from time to time in Business as Mission (BAM) strategizing that franchising has a potential advantage in starting and operating kingdom businesses abroad.  Sometimes it has been referred to as “BAM in a Box”.  A report by the BAM Think Tank Group which met in Thailand in 2013 produced a lengthy report which is worth reading in preparation for contemplated steps in the direction of franchising.

One section of the report is entitled BAM in a Box SWOT Analysis.  The following is a summary of the SWOT section, but the full report is worth the reading: 
Business as Mission Franchising:
Replicating Proven Businesses
BAM in a Box
November 2013

Strengths for BAM Franchising (internal)
  1. Franchising builds on strong networks of distributors, distribution chains, and suppliers so the franchisee does not have to re-invent these.
  2. There is a less need for high level business expertise and entrepreneurial skills as building blocks and franchisor ideas are available for the franchisee by using templates and available materials and research. A person with strong people skills and some level of business acumen has a good chance to succeed.
  3. It opens up possibilities for peer BAM mentoring toward replicating the BAM model with financial and kingdom motivation.
  4. There is less risk than with a startup business.  Franchisors give tools to run a business so entrepreneurship is less necessary.
  5. Investors are more inclined to invest in a proven franchise concept than in a startup company.
  6. Franchising enforces accountability and professionalism with systems for training, marketing, financial projections, accounting, HR, etc.
  7. The franchisor provides training, mentoring, initiatives, peer-to-peer networking, support from other franchisees.
  8. Franchise models can strengthen the BAM movement with “back end” systems allowing more time for concentration on integration of faith and work.
Weaknesses of BAM Franchising (internal)
  1. There are few proven BAM franchise models.
  2. There is a danger of thinking it is easier than it is.  It is more than “executing the template” and it requires full business commitment. It still requires significant financing.
  3. Entrepreneurial franchisees may find the “franchise system” too limiting since it requires business skills, not significant entrepreneurial skills.
  4. The franchisor may not have a full understanding of, commitment to, and tolerance for all of the BAM bottom lines, particularly the spiritual and social.  A clear understanding of how the missional component integrates with the business is important and what control the franchisee has.
  5. Franchisees from the mission community may have additional training and support needs and the franchisor may not want to make the additional invest in them.
  6. It is high risk and likely will not work if the franchisee does not see it as a true profit-making business taking creativity, hard work, financial acumen and leadership in selecting/managing employees.  It demands an aptitude and calling to business and robust Biblical theology of business; it is not just a means to an end.
  7. The franchisor has the right to close down a low-performing franchise; putting at risk the missional ends of the franchisee.
  8. There is a contract between the franchisor and franchisee that carries certain requirements so the franchisee cannot do as he/she wants.
  9. People underestimate the amount of energy it will take to develop an operations manual, training system for employees, franchise agreements, marketing standards, etc.
  10. The franchisee must have a stake in the company, and not rely on an agency or church.
Opportunities for BAM Franchising (external)
  1. Franchising builds a culture of abundance mentality and sharing networks.  The pie gets bigger with sharing.
  2. A franchise has a proven business model and provides a place to start, when customers have been clearly identified.
  3. With clear understanding between the franchisor and the franchisee, the business provides opportunities for kingdom living, making disciples and loving people.
  4. Because of the networking and mentoring which is built-in to franchising, there are opportunities for expansion of the quadruple bottom lines.
  5. Franchisors see places to start and business opportunities which others may not see.
Threats to BAM Franchising (external)
  1. A franchise in a community has many stakeholders and all must be considered when bringing an enterprise in from the outside.  For example, competitors may create adverse reactions to the franchise.
  2. A franchise owner must realize the business is not all his and it may be threatening to not own the brand, just get what is left over after fees and royalty costs, and have to meet contractual requirements.
  3. Franchisors are focused on the financial bottom line and protecting their brand.  But this needs to be balanced with a nurture of the spiritual bottom line which constantly drives for a kingdom culture.
  4. Franchisees many times are advised to have a local partner for ease of legal requirements but the local partner may not fully understand franchise processes and procedures, cultural differences, ethical standards and kingdom focus.
  5. If capital is borrowed, payment schedules and pressure can be threatening and require due diligence and continual monitoring of cash flow.
  6. Non-compete clauses may make it impossible to establish a similar business if the franchise does not work out.  Franchisors have the right of first refusal and the right to sell to someone else.
  7. The franchisor could pull the franchise quickly if necessary (from their point of view), and the franchisee may be without a business visa and unable to continue in the country.

Larry Sharp, Director of Training, IBEC Ventures

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IBEC Ventures -- Consultants for BAM/Business as Mission