Over the next few weeks on Tuesdays with Tukaiz, we’re going to delve into the world of franchise businesses. Franchises have existed in the United States for well over one hundred years, but they really started to explode in the 1950s as the interstate highway system was built out and people became able to easily travel extended distances by car. Thus, many of the first franchise chains were fast food restaurants, such as White Castle and McDonald’s. Chains quickly started popping up for additional products and services (e.g., hotels, gas stations), evolving into a wide array of vertical industries. While top franchises like Subway, Dunkin’ Donuts, and McDonalds have fast food roots, this concept has also transcended into other areas, including hair salons (Supercuts), tax preparation (H&R Block), and commercial cleaning (Jani-King). A full list of the top 500 franchises and their associated start-up costs are compiled and listed each year by Entrepreneur Magazine.

Many traditional businesses attempt to start out independently, getting start-up funding from loans or venture capital. The franchise start-up model offers a different approach, which is quite interesting and has ultimately proven successful over the past fifty years. One or multiple entrepreneurs (the franchisors) will choose an industry, build a business plan, create an operational formula, and develop a brand associated with that business. A small amount of locations may be started to test and perfect the business before rolling it out to a larger audience. Franchises sometimes start more organically, such as when a business owner decides to expand his/her business outside of its original state or region.

Regardless, after a formula is in place, the franchisors will then sell their concept to people who are interested in starting or investing in a business, also known as franchisees. Each franchisee will typically pay a fee to the franchisor, and the franchisor will provide the franchisee with the resources to build his/her business. The franchisor also receives capital to provide those resources and grow the overall chain. Resources typically include things like trademarks, processes, recipes, raw materials, branding/signage, building designs, and even training. The franchisee is often responsible for determining the location and obtaining things like permits (this works to the advantage of the franchisor—a franchisee is more likely to be familiar with local laws and regulations that would otherwise be hurdles for outside organizations).

Ideally, a franchise strives to be a turnkey operation, providing all of the resources necessary for franchisees to quickly start up locations and expand the entire franchise network at a rapid pace. When thinking about the requirements for any type of retail-based product or service chain, one of the key factors for success is providing a reliable, consistent experience to consumers. This factor is especially true for franchise chains. Branding must be consistent, and any promotions will typically have to start and end at the same time for all locations. Some franchises have additional considerations. For instance, a franchise restaurant needs to provide a consistent customer service, atmosphere, and “taste” experience. Therefore, a food franchisor will typically develop the recipes and pass them to each franchisee to ensure a consistent experience from one location to the next. In addition, individual franchisees will often experiment with new ideas, and some of these will eventually be adopted by the overall franchise—this is how the Big Mac came into being.

Because a franchise organization is a turnkey business, franchises need turnkey solutions to ensure that they are delivering the best, most consistent experience possible across all locations. Over the next few weeks, we’ll delve into some of the latest trends and demographics related to franchise businesses. We’ll also discuss how these franchises are utilizing turnkey solutions to provide the best customer experience possible to find a path to growth.