What Makes A Killer Franchise Brand?

Many global franchise brands are killer brands. Some famous names come to mind, e.g., KFC, Pizza Hut, McDonald’s, 7-Eleven, to name just a few. But we have also witnessed some local brands becoming killer brands in Indonesia: Indomaret (previously known as Indomart), Alfamart, Apotek K-24, TX Travel, and ILP. In Philippines, Jollybee is one of the local killer brands.

Killer brands – brands that create and market a brand that can annihilate the competition – are threatening other players in the same industry. Once a student of a leading university in Jakarta asked me, whether his father should convert his business to Indomaret or just continue with his traditional retail business. I asked him, “Do you think your father’s business can compete, let alone survive, if Indomaret were to open a store near his?” Fact is, his worries are well placed – that the presence of Indomaret might ‘kill’ his father’s business. He was in fact thinking of becoming a franchisee, rather than competing with the local killer brand in retail minimarket franchise. Other ‘word of mouth’ worries among the locals that I quite often hear are that traditional pharmaceutical stores would soon close if Apotek K-24 were opened in the neighbourhood. This is how impactful the killer brands can become.

Regrettably, not all killer brands can stay as killer brands for long if the management is not committed in maintaining leadership and continuous improvement. The dynamics of business competition requires a killer brand to monitor and keep its positive image and reputation, and be highly active relative to the competition. A killer brand has to make its brand and business sustainable.

The following are some pointers if you want to develop a killer franchise brand in your industry.

Expand AFAP (As Fast As Possible)
By expanding fast, the presence of outlets and outlet signages are daily advertisements that create publicity for brands like Indomaret, Alfamart, Apotek K-24, Johnny Andrean, and Rudi Hadisoewarno. This means your stores should be in strategic, high traffic areas.

We believe that a higher number of outlets and store signage exposure will lead to brand domination. Case in point includes Apotek K-24 which is already going strong with more than 150 outlets in Indonesia after only four years of franchising. Other famous examples include Indomaret which has already exceeded 4,500 outlets. Indomaret was founded in 1988 and franchised in 1997. Another example is Alfamart. It was franchised in 1999 and now has more than 3,500 outlets.

However, be aware that fast expansion may not be relevant for all types of businesses, especially if your business is complicated and requires comprehensive training to deliver high quality services. For instance, one of my clients, ‘mom n jo’, a maternity spa, needs to train therapists for almost three months before transferring them to the franchisees.

Fast expansion may also potentially deteriorate your service if your support system is not in place, or your management team finds it challenging to handle the competition. Larry Light, a former McDonald’s Chief Marketing Officer, admitted this in the book, “Six Rules for Brand Revitalization”, that its fast expansion, while lacking support system, led them to several service quality and marketing problems.

Open, Operate, Then Sell
One of the most effective strategies to expand fast is: to open franchisor-owned outlets, then sell them to the investors as a franchise. This will keep the pace of opening new outlets high, even when there are only a few franchise inquiries approved.

Outlets with good profit will also have a higher value than a totally new franchise outlet. A franchise outlet may be started at around US$40,000, for example. Using this strategy, a franchisor owned outlet, after one year operation by the franchisor, may be sold at US$50,000 if the performance is at a satisfactory level. This “Open, Operate, Then Sell” strategy is implemented by Indomaret and Alfamart of Indonesia.

Open Several Outlets Simultaneously
Apotek K-24 applies this strategy. After soft opening, several outlets participate in a grand opening celebration. The number of outlets escalated from the first grand opening celebration with only seven outlets to more than 35 outlets last year. In 2009, Apotek K-24 opened 35 outlets within a short span of three months. Its ability to open up to almost 12 outlets every month consecutively is testimony to its excellent marketing strategy.

The publicity of its grand opening ceremony of such a large number of outlets within three months created high awareness of its existence to the audience. The event usually combines free health service to the poor who live nearby to attract large crowds.

Unique Architecture
Unique architecture, a professional look to the interior as well as exterior, is an important element in building a killer franchise-brand. Strong concept of interior also produces more sales. The management of Eiger, a leading “adventure life-style” chain store in Indonesia told me that modern design of the store interior could significantly increase their revenue to more than 50 percent.

In fact, due to clever design, leading brands such as Disc Tarra, Odiva, ILP, and Apotek K-24 have been mistaken by many Indonesians to be foreign brands.

Unique But Relevant Differentiation
Apotek K-24 consistently differentiates itself from other pharmaceutical stores as 24-hour operation stores. This brand easily occupies the mind of consumers, especially who live around areas without 24-hour pharmacy stores.

It is not easy to make a relevant differentiation. You must start by questioning the real needs, or hassles, which are not yet met or solved.

Hi-lab, for example, is a new pharma-laboratory with a smart differentiation strategy. Its Laboratory Information System can send results directly from analyser to customer’s handphone via SMS or MMS. If required, the report can also be sent to the customer’s doctor’s cell phone. The customer and his/her doctor can also access the report via Internet, or Blackberry – using a secure password of course. The report will be stored in the server for at least five years. So your doctor, even if located overseas, can examine your medical history anytime.

Another good example of relevant differentiation in franchise brand is ‘mom n jo’, a premier spa and massage services dedicated to pregnant women, babies, and kids. This brand entered the business as a pioneer in its sub-category. Besides the unique and relevant differentiation, the founder’s discipline in brand building has brought ‘mom n jo’ to be the leading brand for maternity spa in Indonesia. Beside pregnancy massage for mothers-to-be, baby massage is one of the favourite services offered here.

A relevant uniqueness will make the people open their hearts and willingly give a room in their mind for the brand.

Killer Price
If your business has reached economics of scale, you might want to implement the killer price strategy. This is a strategy of pricing that attracts large crowds, but at a minimum margin. KFC in Indonesia is perceived to use this strategy, since one of their menus is offered at a killer price of 60 cents only. It is very difficult for other players to compete if they cannot reach the economies of scale. CFC, one of KFC’s former competitor, recently used a new positioning strategy: “Not Only Chicken” (Bukan Cuma Ayam). I guess this is because it is difficult to compete in “chicken” restaurant sub-category alone, due to the low pricing or minimum margin, or in offering the favoured taste.

Strategic Partners
Going public may not be a good strategy, because you have to be transparent and give some publicity if you have any big plan. So, inviting strategic partners could be a better option instead.

My Salon, an Indonesian hair and beauty service, offered some of its franchisees to become its strategic partners. The result has been fantastic. A huge flagship and training centre is operating now at a profitable level in Blok M Square. Another huge centre is in progress in Blok M Plaza – both in Jakarta.

Now you know some of the strategies to create a killer franchise-brand. Which one of the strategies just mentioned would fit into your business?

Utomo Njoto is a senior franchise consultant from FT Consulting. He has consulted the award-winning franchisors in Indonesia, i.e. ILP, Odiva, Disc Tarra, and Apotek K-24. FT Consulting is a leading Singapore-based franchise consulting firm in Singapore, Malaysia, and Indonesia.

For more information, visit www.consultft.com
Utomo can be reached at utomo@consultft.com