Is your business suitable to expand successfully through franchising?
Do you own a business that could be suitable for franchising? Consider if your business exhibits the foundation stones to form the basis of a successful franchise
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.
A PROVEN SYSTEM
Good franchising requires the franchisor to have gone through the learning curve, identified the pitfalls and found appropriate solutions, the franchisee can then be shown a business model that works. The franchisee should be replicating a tried and tested business system, rather than experimenting with new ideas.
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.
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 franchisees 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. Franchisees will be attracted by a professional approach to recruitment which involves the right body language, meeting room atmosphere, wall hangings and the approach to franchisees. That which portrays a lack of true professionalism can be a 'switch off' to the right people.
PRODUCTS/SERVICES WITH GOOD STAYING POWER
Franchisees 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 franchisees 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.
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 franchisee 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 franchisee 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 franchisee and the franchisor to succeed together.
The attitude of management towards franchising is key to success in franchising. Franchisees are not employees, they are self-employed business owners who must be treated as equals. While the franchisor needs to lead with authority, franchisees 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 franchisees.
MORE BENEFITS OF FRANCHISING YOUR BUSINESS:
- Group purchasing schemes
- Continual cash flow from initial and ongoing fees
- Improved regional sales presence
- Low operating costs
- Reduced distribution costs
- Dedicated quality control auditors
- Low personnel costs
- Sharing of best practices
- Collective publicity costs
- Option of national contracts
- Profitable return on outlets
- Reduced head office resources
- Possible buyback of top units
- Reduced capital expenditure
- Sharing of financial costs
- Reduced staff constraints
Written by FDS Southern Franchise Consultants Gordon Patterson and Gary Rigby