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Franchising in The Perfume Industry: Discover Pros and Cons

Franchising in the perfume industry demands its tips to be started.

In 1920, the French fashion icon, Coco Chanel, launched her first perfume line, A fragrance that later became the most popular perfume in the world and still holds the title. Chanel No.5 was a massive reputational and financial success for Chanel. “This perfume alone made her a multi-billion dollar fortune despite earning her a mere 10% of the profits”.

How could a perfume brand like Chanel extend its business reach to achieve this worldwide success?

Why is investing in perfume franchisees important?

A black perfume picture

Perfume is a specific product, and starting its business under an established company with similar products will guarantee its success. 

This is because, in a franchise, you will agree with the owner of the known brand name, who will facilitate several things to make the new venture successful, giving the new business a cutting edge. A franchise also offers a ready-made way of conducting business. These are the major issues addressed at the beginning of a business and if there are strategies already in place by the parent company that guarantees the business to operate at a profit. 

Besides, investing in perfume franchises also gives you the reputation of the parent company, particularly excellent customer satisfaction and already established high-value customers. 

Fairly, the franchisor’s assistance in terms of marketing strategies and step-by-step guidance, as well as the provision of needed facilities and equipment in exchange for the franchise fee and royalty payments, makes investing more attractive in the franchising business.

Facts and Figures: Perfume Franchise Opportunities

Globally, the perfume industry is worth approximately $50.85 billion, with prospects of expansion by approximately 25% by 2025. This estimate is based on people’s constant desire for luxury and exotic fragrances and the inclination for personal grooming.  

During the lockdown, when Covid 19 was declared a pandemic, online perfume franchising thrived as sales increased by approximately 150-200%. This also widely impacted the sales of perfume-related products such as scented candles and diffusers, which attracted high demand hence more sales to perfume franchises that offer similar products.

How to expand your perfume brand legally?

There are several ways for a brand to grow in size and for individuals to join and participate in the growth of a perfume business. Among them is franchising. A franchise agreement allows the franchisor company to develop into the new local markets and the franchisee to enjoy the benefits offered by the main company.

Working under a franchising contract makes it possible for the franchisee to get better business insight, have more effective connections in the professional network, use a pre-established business model and customer base and gain a greater chance for business growth.

Besides all these advantages, the franchising agreement limits the franchisee’s independence and creativity. It also inflicts too much pressure on the franchisee regarding the business extension and makes working conditions less flexible.

Here is another article about franchising for further information:

 5 Best Ways to Run a Franchise

Franchising in the perfume industry

What is to gain from franchising in the perfume industry?

Helps with business insight

A newcomer must be passionate about perfumes and scents; however, it does not guarantee a successful business. Other factors, including business insight and market skills, affect the outcome. An existing perfume franchise has already figured out the business routine and can help with the minimum requirements to start a business.

Better networking with other actors in the industry

A franchiser works with a series of companies and businesses. Whether these companies are suppliers, distributors, investors, or even rivals, they all shall be considered stakeholders, and the company’s relationship directly affects business. As a newly funded business, the franchisee may have a hard time building its network; consequently, performing under the terms of a franchising contract provides an opportunity for the franchisee to benefit from the extended professional network of a big company.

Proven business model

Some experts describe a business model as the “logic” of a company that defines the roadmap of a business and the steps to be taken to succeed. A comprehensive practical business model lets a company attract a talented workforce, convince investors and maintain a productive relationship with partners and customers. A franchiser most certainly expanded its business using an effective business model. That being so, utilizing a franchisor’s proven business model can be a determining advantage for a new business.

Benefit from a well-known brand name

Have you ever wondered why companies expand so much on advertisement? According to a survey published by Customer Thermometer, 64% of women and 68% of men have felt an emotional connection with a brand. This means that whatever companies spend to make their brand name easily recognizable will eventually pay back as people consider it a known brand. Considering the significant impact of a known brand name on business performance, working as the representative of a well-known company can significantly boost businesses’ revenues and financial performance by ensuring customer loyalty.

Established customer base

One of the most serious concerns of every rising business is gaining consumers’ attention and attracting as many customers as possible. To achieve this goal, companies must spend a considerable amount of time and money in allocating resources and workforce. However, it is not always that hard to reach this objective. For example, when a franchisee starts working under a franchising contract, the product is already demanded by a pre-established customer base, thanks to the efforts of the franchiser. This means that the franchisee can avoid losing resources and use them to expand the business.

Optimize efforts and expenses

Choosing a franchising agreement, among other options in the perfume industry, provides an opportunity to benefit from wholesale buying products instead of dealing with independent sellers. It also lowers the need to perform many day-to-day business tasks, saving considerable time and money. Altogether, this means offering a more diverse range of perfumes while investing less money and effort.

More focus on growth

By removing so many barriers to professional performance, franchising is a chance for the franchisee to concentrate on matters of most importance, such as growing the business and extending its territory. As a part of the main company, expanding the business reach of franchisees ultimately serves the growth of the franchiser company.

What are the downsides?

Less creativity

Like fashion and clothing, creativity is a key point regarding perfumes and scents. Innovation is the element that distinguishes every specific brand and its peculiar scents. As a result, creativity is the primary source of competitive advantage for both new and long-established businesses that helps attract customers and supports the promotion of the brand’s name. Acting as a franchisee, the business group mainly follows the main company’s common path, and there is less space for addressing innovation in the franchisee’s work. In this situation, the franchisee may lose many opportunities to gain a competitive advantage compared to other businesses that perform independently.

Less independence

After entering into a franchise contract, the franchisee will become a franchiser subsidiary, representing the company’s brand name. Under this circumstance, the franchiser will gain a certain level of control over the franchisee’s business. The franchisee no longer has absolute power over business matters such as pricing, choosing ingredients and products, business strategy, etc. The franchisee is also obligated to meet the minimum business requirements of the franchiser according to the franchise agreement.

Most importantly, the franchisee will lose control over selling the business without the franchiser’s permission. This can be problematic, especially when the franchisee decides to start a business of their own or even get out of the company and retire.

Less flexibility

Less independence in professional performance eventually leads to less flexibility in business. While other actors in the market enjoy a wide range of options regarding products and pricing, the franchisee is limited to the options offered by the franchiser. These limitations can cause poor service providing and consequently less profitability.

Forced to maintain growth

A franchiser can indeed enable rapid growth for the franchisee by helping the business initially; however, this help comes with responsibilities and expectations. By offering a franchise opportunity, the ultimate goal of the franchiser is to expand its business group. It is impossible unless every one of its subsidiaries is committed to this growth. There is no reason for a big company to bother with a franchising agreement and its consequences if there is no business growth perspective. Yet, commitment to continuous growth can be too much pressure for the franchisee since it takes the first steps of setting up a business and dealing with many unexpected issues.

Franchising vs Independent business: Perfume Franchise Opportunities

A man putting some perfume on his wrist

Should a perfume business owner operate as an Independent business or a franchise? Both ways provide the implementation of the intended business idea as the owner wishes; however, when it comes to the perfume business, where the business owner intends to be a provider of a specific product, then franchising will guarantee success. This is because the products will be sold under a well-established company and a recognized brand, attracting preferred relevant markets. Additionally, the franchisor supplies the franchisee with ready-to-use products, relevant business strategies, and approved equipment and merchandise. 

On the other hand, where the business owner intends to introduce new and innovative products and services, it can be difficult for the same to find its niche in the marketplace where it starts independently. Moreover, perfumes being specific products, needs support from an experienced company making it favourable for it to operate as a franchise. 

To Sum up

To conclude all these points, there are many advantages to franchising in the perfume industry, although there are some drawbacks. Whether to act under a franchise agreement is a decision everyone should take according to their limits and capacities. It would be beneficial to use an expert opinion of a legal professional before making any decisions. Our lawyers in LegaMart can answer all your questions concerning franchise agreements.

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