Eight steps to running a successful franchise
Before establishing your business as a franchise, there are a number of key points to remember. Malcolm Porter of FDS South East explores some of these
The past 12 months has seen a big rise in the amount of companies who are considering growing their business through franchising. At a time when the economy is a cause for concern franchising offers a very cost effective way to expand. It has been well documented that banks are tightening up their lending criteria and they are looking for businesses with a proven business format and a track record of achievement - and franchising fits perfectly into this category.
Outlined below are some of the key criteria that any potential franchisor should meet if they want to franchise their business.
Strong 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 has been formulated around a local region and is unsuitable to travel nationally, it is best to formulate a new brand before franchising is undertaken. The brand should be simple and shout out the message of clarity, professionalism and quality.
A Proven System
Good franchising requires the franchisor to have gone through the learning curve, identified the pitfalls and found appropriate solutions, the franchise owner can then be shown a business model that works. The franchise owner should be replicating a tried and tested business system, rather than experimenting with new ideas.
Historical Trading Performance
Franchising is about replicating a financial model that has already been achieved, so it is imperative that there be sufficient trading to give realism to any financial projections.
Products/Services with Good Staying Power
Franchise owners do not wish to invest for the long term in a business that has a product or service which may be fashionable or become obsolete over time. Confidence is inspired by that which demonstrates longevity in the marketplace. Discerning prospective franchise owners will be looking for product and service deliverables that are required in a depressed market. They can then be confident of a continuing market need through varied economic conditions.
The corporate image of a business is portrayed through external signage, a protected brand, corporate colours, vehicle livery, corporate dress, website design, promotional material, own label products, stationery and head office presentation. Quality franchise owners are attracted to a business that has a strong corporate identity that they would feel proud to belong to. It is important to develop strength of corporate image throughout all aspects of the operation.
Professionalism is manifested in how the telephone is answered, the quality of service provided, the clarity of written communication, the nature of the head office meeting room, the attention given to detail, a clear code of values and evidence of satisfied clients. Franchise owners will be attracted by a professional approach to recruitment which involves the right body language, meeting room atmosphere, wall hangings and the approach to franchise owners. That which portrays a lack of true professionalism can be a 'switch off' to the right people.
Sufficient Profit Margin
Franchising is not suited to low margin/services - there must be sufficient margin to sustain continued business growth and development, while also enabling both the franchisor and the franchise owner to enjoy a reasonable return. The franchisor must receive a profit margin sufficient to provide good back-up and support, and maintain a healthy 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 is important that any mark up on product supply or management service fee provides a win:win situation that enables the franchise owner and the franchisor to succeed together.
The attitude of management towards franchising is key to success in franchising. Franchise owners are not employees; they are self-employed business owners who must be treated as equals. While the franchisor needs to lead with authority, franchise owners should be given the opportunity to have their ideas and suggestions heard and discussed. The franchisor's objective is to build a successful business through the successful development of its franchise owners.