Brand Name vs. Brand New

I am often asked if joining a franchise system with a well established brand name is better than pursuing an up and coming concept. The answer is of course, maybe and maybe not. A well developed brand identity can help bring customers to your business and shorten your journey to the cash flow breakeven point. But they can also be hard to come by.

Many big name franchise brands are no longer attainable for the average aspiring business owner. As a franchise grows and builds on its success, often the bar is raised regarding financial requirements and experience qualifications. This is why most units of the top food franchise brands are owned by large restaurant groups. They have the experience, infrastructure and financial wherewithal to launch multiple units. 

Additionally, often the very reason that people become aware of a particular brand is because someone has purchased the franchise rights in that geography and has developed the brand locally. This can mean that the most desirable territory is no longer available by the time a concept has strong brand identity in a market area.

McDonald’s was once a local shop in San Bernardino, California, as was Taco Bell. These giants, like all companies, started off with an unknown brand. The key to the success of a franchise lies not only in having a good product or service, but in having a proven system for doing business that can be replicated. A big part of that system is having solid sales and marketing programs to build a brand name in your market. Typically, you will be obligated to spend between 2% and 4% of your revenue on brand building whether or not the company you choose is already a household name. So don’t plan on saving money on advertising just because you pick an established brand.

A newer concept is often the right choice for a prospective franchise operator. You may be able to get in early on a future mega brand, but more importantly you may find a company that has a great stake in your success and will bend over backward to help you. You may also be able to meet an underserved need in the marketplace and build equity in your business more quickly. Also, newer concepts are often more agile and can respond to market needs more readily.

When looking at an up and coming franchise, it is important to look for franchising experience among the members of the management team. Also, try to find a company that has at least twenty units and 3 to 5 years of operating success. These minimum criteria can help you determine if a concept is gong to have legs in your area too. 

Whether a big brand name or an up and comer is right for you depends on your unique situation, but either way, finding a solid business model should be your primary objective.

Have a question about business opportunities? Send it to dbrunell@dearbornwest.com.