Strategic Alliances: Critical to achieving success in franchising
This article appears in the Jan/Feb 2015 issue of Business Franchise Australia & New Zealand
By dictionary definition, an alliance is a union or association formed for the mutual benefit of two or more organisations.
In its definition alone it is clear that any business, no matter what sector it’s operating in, relies on alliances to survive! This can include anything from a hairdressing salon having an alliance with local clothing store and partnering to offer special promotions to locals or on a global scale where celebrity chefs partner with airlines to create extraordinary menus that appeal to the target consumer.
Forming and developing existing relationships that extend beyond the four walls of your business are fundamental to achieving success. Ice creamery or fashion store alike, the benefit of key associations remains the same: core competences and capabilities are looked after appropriately and you give your business the best possible competitive advantage.
Like most effective relationships it’s absolutely critical that both parties uphold the following fundamental components – understanding, transparency and honesty. Working in a manner that is professionally respectful means that suppliers know what to expect and customers can trust in consistency and quality in the goods and services they will receive. For retail franchising, it’s where consumers receive a consistent product or service regardless of location, owner or staff.
Alliances can be structured in different ways and most organisations are likely to experience and engage in a number of different strategic relationships for various reasons and at different stages of growth.
So what type of relationships are considered strategic alliances?
The list is exhaustive! These are the external associations a business has to help conduct its day-to-day operations and things that essentially keep a business ticking over – work done by key suppliers and external contractors. This could be anything from the company you rely on for internet connection to the clothing manufacturer that puts together your brand’s garments. Both completely different associations but equally as important to a business, which ultimately leads to the success (or demise) of an organisation.
Why is it so important for alliances to be built into the franchise model?
For franchisors and franchisees, strategically driven alliances are at the crux. The whole concept of franchising is based on solid and trusted alliances and building and nurturing these two-way relationships.
If you were to purchase a meal from a franchise chain and it was not the same quality you were expecting, you’d be less than willing to visit the said franchise again. They say no one likes a surprise, unless they know what it is. And people definitely don’t like a surprise when they walk in the door of a known and trusted franchise. It defeats the purpose of the whole franchise concept through and through.
The beauty of the franchising model is that it provides franchisees with a ‘cookiecut’ version of their chosen business, and therefore relies incredibly on consistency. Proven, tried and tested systems are in place, instructions on how to work the brand are stipulated and consistency of stock and product is a given. This is what makes the model so attractive to prospective business owners. There is a benchmark and standard for all elements in the business including, sales results for each store, staff uniform requirements, POS display and merchandising.
A quality alliance also opens up buying power that’s advantageous for both franchisor and franchisee.
Take Cold Rock Ice Creamery for example. We probably wouldn’t have too many takers keen to buy into the Cold Rock brand if each franchisee had to constantly source all of their own ingredients to create our signature concept – consistency would be out the window, it would be a headache for our franchisees, and ensuring everything was up to the Cold Rock standard, would be bordering on impossible. This is a prime example of where strategic alliance comes into play. We rely on strong and mutually beneficial relationships with trusted milk suppliers, teaming purchasing power and product consistency together for the ideal end result. And unless there was an issue with a product or service, a business would be totally inefficient if it shopped around to secure different strategic alliances too regularly!
Like most franchise businesses, across the brands at Franchised Food Company we have multiple strategic alliances, or as I refer to them as, ‘relationships’ or even ‘partners’. This might be anything from an alliance with a major retailer like Coca-Cola, a confectionary company, an insurance broker, a communications agency, equipment suppliers, shop fitters, landlords…the list is endless. We have also occasionally co-branded with another like-minded, non-competing brand to offer something new and unique, like a Cold Rock Express inside a Video Ezy store.
Retail trade figures released by the Australian Bureau of Statistics show Australian retail trade turnover is on the up. I’m not sure where they get their information from, but in the fast food and treats retail space, it’s tough. And franchisees need to step up to the plate and hone in on their business’ strategic alliances and relationships… for success. Those with the strongest relationships are often franchisors with the most accolades and they will attract more competent franchisees and keep customers coming through the doors.
Franchising is a great way to network and develop meaningful relationships and broaden your network. My advice to those looking into franchising in the retail or food sector… Do your due diligence and find out for yourself if those on your list have the support networks; relationships and strategic alliances you need to succeed. And if the answer is yes and it’s a good fit for you, I say go forth and conquer!
Stan Gordon is the CEO and founder of 100 per cent Australian-owned franchising organisation, Franchised Food Company. The South African born entrepreneur was chosen as the Ernst & Young Business Personality of the Year in 1990 for his work in the advertising and marketing fields, before moving into the franchising sector and then immigrating to Australia in 1996. Now at the helm FFCo, the biggest non-listed franchisor in the fun treats sector, Stan’s business ethos and philosophy for success remain the same; enjoy what you do and have fun while you’re doing it.
Franchised Food Company is Australia’s biggest multi-system non-listed franchisor dealing in the ‘fun treats’ market. All brands under the FFCo umbrella are fun and unique and include Cold Rock Ice Creamery, Trampoline, Mr. Whippy, Pretzel World, Nutshack and Europa. The journey began in 2000 with purchase of iconic Australian brand Mr. Whippy, expanding with several additional brand purchases and forming FFCo in 2009 to house the interests of the numerous brands.