Big timers find franchise route pays off

While many franchises are small to medium retail or service companies, there are several large-scale franchises. McDonald's with more than 25,000 outlets in 117 countries, is one example. American Express, which decided to franchise its charge-card business in certain markets, is another.

"Traditionally American Express ran its own operations around the world, but there was a strategic rethink in the early 1990s which changed this," says Mr Peter Egan, managing director of Centurion Cards which handles American Express's card business in Ireland.

American Express decided to concentrate on large key international markets and to franchise its operations in smaller countries such as Ireland. A suitable partner was identified in Bank of Ireland and Centurion Cards was set up as a wholly-owned subsidiary to run the AMEX card business here. Bank of Ireland paid a franchise fee up front and pays American Express ongoing royalties.

"American Express had business links with Bank of Ireland going way back so it was a natural alignment," says Mr Egan, who ran the American Express operation in Ireland for many years. "My team and I moved across and our job now is to promote the brand and grow the business. Opting to go the franchise route was a very significant move for American Express but it appears to be working well."