The success of crowdsourcing and the on-demand economy have pushed many founders to try untested and unnecessarily risky businesses. We have seen many of those companies flame out in the last couple of years as investor interest has plummeted back to earth.
How should today's entrepreneurs decide not just which industries they want to work in, but how they want to structure their companies? For many, that calculation boils down to two things: how can I scale quickly, and how can I do that without losing focus on quality?
A combination of market forces is making it more inviting than ever to start a franchise business. Of course, franchises do not work in every industry, but for many businesses that are delivering a localized product or service, the model is still one of the most effective.
"You have to take more than just a step back," says David Omholt, president of Plano, Texas-based franchise consulting firm Entrepreneur Authority. "You have to be brutally honest with yourself and introspective about what you're trying to accomplish."
So let's establish what things you can accomplish with a franchise model, and why today's market might be the perfect time to start one.
Growing companies face a litany of challenges, not least of which is the difficulty in maintaining a high level of service and a focus on core values. But franchising can be a solution to that problem by distributing management responsibilities to leaders in the field, not keeping them centralized.
"Franchising can be executed in a way that is actually better for customer service and better for the customer," says Josh Cohen, founder and CEO of on-demand junk removal service Junkluggers. "We found that trying to centrally manage a growing business was degrading the quality of the service and damaging the brand. By franchising, and finding the right franchise partners, we have been able to scale without compromising on service. As a company that has core values about operating responsibly and giving back, the franchise model was the perfect fit."
And franchise companies are scaling successfully, adding a million jobs to the U.S. economy in the last decade. Entrepreneurs who are seeking a business model that fits their growth goals do not necessarily need to fit the typical Silicon Valley mold - franchising still represents one of the most powerful business structures in our economy.
The last couple of decades have seen tremendous shifts in consumer demands. Yes, consumers want more options, faster, for cheaper. But consumers are also voting with their wallets and working with companies that live by a set of core beliefs - community oriented, environmentally friendly, fair labor policies, etc.
In this area, franchises shine. Their distributed management structure means that the local franchise owner is a real part of the community, not a corporate plant from headquarters. This in turn empowers individual franchises to find ways to be involved in their communities and to give to those causes that matter the most.
In fact, franchising is so effective at localizing national ideas that a coalition of charitable non-profits have begun to utilize the model as well. Called social franchising, it is a regimented growth strategy being used by non-profits to reach more groups of needy and underserved individuals.
Scaling a cause-driven business, even in a franchise model, is not without dilemmas. The biggest potential snag is finding the right franchise partners; the people who will buy a local branch of your company and run it as their own. Anyone who runs a franchise is fully aware of how difficult it can be to find quality talent to partner with.
But a combination of market forces has made that less of a problem in recent years.
"The perception would be that decentralizing control would limit the company's ability to push for environmentally friendly practices and community involvement, but because of market dynamics today, the opposite is true," suggests Cohen. "There is a growing segment of people who spent the first fifteen years of their careers doing the corporate thing, and who are now looking to work in a business that is values driven. Millennials can also be excellent franchise partners because they are motivated by the company's values and experience great pride of ownership at the same time."
The workforce in America is about to change rapidly, with technology reducing the need for certain jobs and creating the need for more people who can manage. This dynamic by itself could further the growth of franchises in the U.S. and entrepreneurs should take notice.