For both companies planning to expand their distribution capabilities in the near future and those interested in partnering with an expanding company, the question arises as to what options exist and which options are most appropriate for each of the parties in the given situation, Generally, a distinction is made between company-owned distribution channels, franchise systems and license concepts. In order to make the right decision between these options, the basic knowledge of their characteristics and peculiarities is elementary, therefore, your estate agents at Engel & Völkers are here to present the most important details for future franchisees and investors.
Central, but more cost-intensive than franchising: The company-owned distribution channel
If a company chooses its own distribution channels, it decides on the path of direct control over all sales, work and, if necessary, production processes. Due to the highly centralized management of these processes compared to franchise and license concepts, the company benefits from straightforward communication structures, direct sales streams and clearly organized decision-making powers. On the other hand, proprietary distribution channels are the most investment-intensive form of expansion: every detail of the sales expansion must be planned, managed and implemented, which involves a great deal of work and expense to find, rent and set up suitable properties for new branches or outlets. This is followed by the recruitment of new workforces and their regular wages, local marketing strategies and the provision of necessary care routes. The alternatives that have developed over the last few decades are financially more interesting for a variety of companies, as they permanently engage third parties in the expansion, sharing the costs and giving them exclusive benefits ...
The franchise concept: a promising investment
Through a franchise partnership, new self-employed people can benefit directly from the achievements of the established franchisor by founding their own franchise. These include, among other things, the existing reputation of the brand, a well-known corporate identity, a proven marketing and business concept as well as numerous training and quality assurance programs. In return, a periodically payable franchise fee, sometimes a constant franchisee share of the franchisor's fees in a fixed percentage, and the usual ongoing costs of an independent operation are due. However, experience shows that the franchise partnership pays for itself after a few years compared to free self-employment, since the gains made by the franchisor are simply overwhelming. The franchisee also commits the franchisor to passing on any progress in corporate strategy, for example in the areas of marketing, controlling or training, to the franchisees, thereby ensuring a high degree of homogeneity among the various franchisees, as well as in the franchise partnership itself. This ensures that the individual components of the franchise system do not develop independently, but together - core component of a strong, consistent long-term offer that appeals to the customer and convinces them in all matters.
Alternative licensing: less brand loyalty than in franchising
Regardless of a fixed franchise partnership, it is also possible to purchase only the license for certain products, brands or services. These are then, similar to franchising, loaded with a certain image, which increases the sales opportunities of the licensee, but does not bind him to the fixed structures of the franchise concept. Although this gives the management more freedom in the strategic design, it also means more responsibility for the company's economic success, since the continuing debt ratio, which is essentially different from franchising, is significantly weaker. Upgrades, for example, in the form of a continuing education offers or a CI package by the licensor are often possible, but then connected with additional co-payments, which already covers the franchising through the regular fees.
Franchising at its best with Engel & Völkers
You are considering self-employment, but have not yet worked out a final concept - then you should you consider a franchise partnership with Engel & Völkers. Through our groundbreaking real estate franchise, we have already expanded our brand to 700 locations worldwide, and in 2017 we again achieved record sales of € 667.8 million. Our worldwide network of contacts, a technically innovative working environment and a highly interesting field of activity distinguish Engel & Völkers as a franchisor.
We would be pleased to have aroused your interest in the franchising concept and will be happy to answer any further questions. An overview of free license areas can be found reviewed by clicking the following link.