Is it a good sign when a franchisor has a mix of company owned and franchised outlets in its network?

Shelley Nadler writes:

Some extremely successful franchise brands have both franchised and company owned outlets.

There are advantages of a franchise network having corporate operated outlets. If a franchisor runs its own company stores, it shows it has confidence in the business model and experience of the day-today issues facing franchisees.

Company owned outlets can be a good place for franchisors to develop and experiment with new products, technologies, concepts and services.

This will allow the franchisor to provide real life data to franchisees to establish, for example, that investment in new technology can improve profitability before the franchisee is asked to invest in that technology.

Company owned outlets can also be used to develop new training programmes and be a useful setting to provide initial training to new franchisees and their employees and further training to existing franchisees.

The benefits of a larger network of branded outlets (company owned and franchised) and the increased purchasing power can lead to cost savings in the purchase of products, supplies and equipment and a larger spend on marketing.

However, franchisees should be assured that every company owned outlet should operate on a level playing field with franchised outlets.

Shelley Nadler is a legal director in Bird & Bird’s international franchising team and has many years’ experience of advising on all aspects of franchising.