Brand name recognition is very important to many people. For example you book a holiday, many people want to stay in a certain brand hotel. If they go down south to the Caribbean, if they go to Florida, the hotel brand name ensures a certain standard of comfort and cleanliness. When you go to a city, you have to look for a hotel but if you use their 1-800 number, you can make your reservations quickly. Some hotels are franchises and many customers maintain a lot of brand loyalty. People go to franchises because they know the quality of the products, the price point of the products, the quality of the service.
Depending on the franchise, the brand name will bring traffic to the franchisee. Sometimes, the franchise could be a destination such as McDonald’s. In tough times, people want to go out for a meal but want to ensure a certain quality of food and cleanliness in the restaurant. Instead of trying a new restaurant, they will go to the name which they know. There has been many articles suggesting in tough times, the traffic in certain franchises like McDonald’s increases. This is not the same for all franchises.
I have seen one in the past which said that they never closed a store. I understand that many of the franchisees went bankrupt and the master franchisee took over the location and sometimes sold the same location multiple times.
Many people are afraid to go out on their own. They have been accustomed to a regular pay check every week. As the economy is changing and people are losing their jobs, many people may not be able to find employment quickly. If they get a large severance package, they could use this to start a business. This could mean starting up from scratch, buying a business or buying a franchise.
The franchiser has developed a proven system and many people are comfortable knowing that there is someone to hold their hand to guide them in running a business. The franchisee fee and royalty is the cost that many people are willing to pay just to have the knowledge that head office will continue to provide them training, marketing and product to sell. The only thing that the franchisee provides is the service, the rest is provided by the franchiser.