Throw your weight behind the small business owner
They need support to survive among the big franchise brands
In my career, a common question often comes my way. Why are shopping centres in this region always full of the same brands? Optically in the Mena region, franchise brands account for approximately 80 per cent of the brands found in our shopping centres.
Regionally, the franchise model is generally the most tried and tested mode of bringing to life new brands. Why?
The franchise model is very popular globally because the business model is similar to acquiring ‘paint by number’ artwork kits. Essentially, you put up capital to acquire the franchise rights of a brand for a specific geographic area.
The franchise brands have generally been successfully tried and tested in various markets elsewhere in the world. The product lines are made available for that particular franchise brand which are likely to be accepted well and to sell successfully in the local retail market. Branding and marketing is normally already well-established.
Add to the equation for the franchise shop model the following benefits. The store fit up guidelines which sometimes include the store dimensions, size, the actual furniture, display units, fixtures, equipment, stock, menus, products are all delivered in accordance to the franchise guidelines. The new owner of the franchise brand need only have sufficient capital and staffing ready to be trained in accordance to the franchisor’s curriculum to ensure the delivery and opening of the new store happens in a timely manner.
In many cases, acquiring a franchise brand may take the guesswork out of the investment. This statement holds true for both the retailer’s and shopping centre owner’s perspective. The risk profile for both the retailer’s investment and the shopping centre owner’s risk is likely to be minimised using the franchise model.
Investors, bankers, mortgage holders, supply chain firms, franchisees, franchisors and shopping centre owners generally all benefit from the franchise model. Success has historically been proven to be greatest when utilising the franchise model.
Fresh retail start-ups on the other hand generally have no successful track record, unless the creator has a history of bringing to life, launching and operating well-accepted profitable businesses.
Let us examine a food and beverage start-up to illustrate the challenges and differences with those of a franchise model. Why would an investor want to create a new brand from scratch?
Some of the reasons a new brand would be created from scratch would include lack of available suitable franchise brands in the market, insufficient financial investment capital for acquisition of the franchise brand, market niche opportunities not met with existing franchises or retailers, creation of a cultural or ethnic food specialty, small, large or unusual physical premises which needs to be accommodated or a combination of the above factors.
Inspiration, creativity, passion, patience, past experience combined with ample financial investment all come together when a new retail start-up is envisioned and launched.
Statistically, in North America, over 95 per cent of newly created food and beverage operations fail within the first year of operation. Failure occurs for many reasons. Inadequate financial holding power, failure to do proper research, failure to understand the changing market demographics, changing diet fads, failure to listen to customer feedback, inadequate planning, failure to provide a different product, poor locational choices, poor customer access, poor visibility, bad service and the list goes on.
Start-up food and beverage businesses are one of the most popular small businesses to open. Franchise food and beverage operations are not immune to failure. However, food and beverage start-ups from scratch have one of the highest failure rates.
Shopping centre owners generally want to minimise financial risk in their retailer line-up. As an owner, it is always easier and generally safer to lease your valuable retail space to tried and true businesses which will pay their rent on time. That is why many of the same brands are in each shopping centre, because it comes down to the people’s choice. Many people, whether customers, investors or owners, are not willing to take unreasonable risk.
When you take the time to explore, sample and support new food and beverage outlets, you are embracing, reassuring and encouraging creativity. The retail world is a much better place when we support those new food and beverage concepts in the marketplace.
For the small business owner, success is measured in many ways. Providing a great product, delivered with a unique twist while providing an amazing experience is everything. Let us do everything we can to support these courageous entrepreneurs.