From Agent Networks to Franchising
This month, as usual, we have the appointment with the column “How to do franchising” from the magazine Millionaire, curated by our CEO, Davide D’Andrea Ricchi. In this edition, we try to grasp with the available lines the difference between Agent Networks and Franchising Networks. Here is an excerpt from the article.
“Let’s start by quoting Oscar Wilde: ‘Form and content cannot be distinguished in a work of art; they are one and the same.’ Why this quote? What does it have to do with the concept of agent networks and franchising networks? Actually, a lot. And we’ll understand why soon. Let’s start with the ‘content’.
A company that bases its business model on sell-in or anyway on the relationship with retailers has as its main objective to intercept, through them, the final customers of the business in the territory covered by these intermediaries. The content, therefore, would be to sell (or license) products to a subject who in turn sells to the final customers. This model is generally prevalent with all B2B models. On the ‘form’ side, appropriate market penetration or dominance strategies can come into play. In this case, franchising can be the solution to certain critical issues that a traditional sell-in – sell-out model may present.
Therefore, what are the main characteristics a choice oriented towards franchising can offer to the parent company? Let’s see them together.
1. Greater accountability towards results.
A network of agents or intermediaries involves the parent company intercepting and managing individual realities on the territory often without rules and imprecise turnover objectives. This process leads to more flexible relationships with each interlocutor, without control over the agent’s individual work process and making the desired objectives at headquarters more precarious. Franchising allows standardizing relationships through a franchise contract, controlling affiliates more towards business goals because each one has an initial investment at stake that they intend to capitalize on, their entrepreneurial reputation. This is a source of greater motivation and sense of responsibility.
2. Detailed territorial control.
The search for people in a certain territory can be extremely costly in terms of resources and energy. Therefore, affiliation allows “delegating” the search for other collaborators on the territory (whether they are affiliates or sales agents) who, within the limits of the franchising contract stipulated with the parent company, can relate directly to the territorial affiliate (with a Master Franchisee perspective), greatly lightening the activities of the parent company and effectively penetrating/covering the territory. This is because those who work and operate in a certain entrepreneurial and commercial context know its dynamics thoroughly.
3. Lasting relationships.
A franchising contract lasts several years (usually 5 or 6) and can therefore guarantee the parent company a consistency of coverage and turnover that would be difficult to achieve with a simple sales agent activity (even single-brand). Furthermore, a franchising contract can provide, on one hand, concrete assistance and support for the affiliate and, on the other hand, protections for the use of the brand for the parent company. In this way, a relationship that is often managed “artisanally” is strengthened.
4. Possibility of channel integration.
A franchising network does not exclude an agent network (although certainly an affiliate can never trade products/services of other competitors). However, attention must be paid to areas of competence. Although there may not be territorial constraints for a “representative” activity, it is important to ensure that in a certain territory there is no overcrowding of agents and affiliates (but also among affiliates). In this case, a geomarketing analysis calibrated on the consistency of the target becomes necessary.
