Can your business be franchised?
Malcolm Porter, of FDS South East, explains why now is a good time to give your business a health check and discover whether it is suitable for franchise development
As interest in the franchise industry continues to rise, the number of companies considering expanding their operation through franchising is growing and shows no signs of slowing down.
With the economy in the UK and abroad remaining a major concern, franchising continues to offer a very cost effective way to expand. Not surprisingly, banks have tightened up their lending criteria and are now looking for businesses with a proven business format and a demonstrable track record of achievement. Franchising fits this category perfectly and, as such, a number of banks have set aside funds specifically for this sector.
However, your business needs to be fit for franchising – outlined below are some of the key criteria any potential franchisor should meet if they want to franchise their business successfully.
Good branding is fundamental. People want to invest with a sense of pride in a business that portrays a strong corporate identity and has a brand suitable for national or international recognition. If the trade name is specific to a local region and is unsuitable to travel nationally, it is probably best to formulate a new, more generic brand before franchising is undertaken. The brand should be simple and clearly deliver the message of professionalism and quality.
Tried and tested
It is a prerequisite of food franchising that the franchisor will have gone through the learning curve, identifying all the pitfalls and finding appropriate solutions. The franchise owner can then be presented with a business model that works. The franchise owner should be replicating a tried and tested business system, rather than experimenting with new ideas.
Franchising is about cloning a financial model that has already been achieved, so it is imperative the business has a sufficient trading history if the financial projections are to have any realism.
Franchise owners don’t want to make a long-term commitment to products or services that may become obsolete or unfashionable in the future. Confidence is inspired by businesses that can demonstrate staying power in the marketplace.
Discerning prospective franchise owners will be looking for deliverable products and services that are genuinely needed in a depressed market.
They can then be confident of investing in a business opportunity whose services are in constant demand no matter what the economic conditions.
The corporate image of a business is portrayed through a protected brand, website design, external signage, corporate colours, vehicle livery, corporate dress, own label products, promotional material, stationery and head office presentation.
Quality franchise owners are attracted to a business that has a strong, consistent corporate identity they would feel proud belonging to. It is very important to develop a strong corporate image throughout all aspects of the operation.
All aspects of your business should demonstrate your professional approach – how your staff answer the telephone, the standard of your written communications, the atmosphere of your head office meeting room, your code of values and clear evidence of satisfied clients.
Franchising is not suited to services with low margins – there must be a sufficient margin to sustain continued business growth and development, while enabling both the franchisor and franchise owner to enjoy a reasonable return.
The franchisor must receive a profit margin sufficient to provide good back-up and support and maintain an ongoing research and development programme. The franchise owner must have sufficient margin to build a rewarding business given their commitment and dedication to replicating the proven system.
It’s vital to appreciate that franchise owners aren’t employees – they are self-employed business owners who should be treated as equals. While the franchisor must lead with authority, franchise owners should be given the opportunity to have their ideas and suggestions heard and discussed.
The franchisor’s primary objective is to build a successful business through the successful development of its franchise owners.
Malcolm Porter has first-hand franchise knowledge and a wealth of expertise in training, sales and marketing. He provides a full range of consultancy and recruitment services developed by Franchise Development Services.