Is your business suited to expansion by true business format franchising?
Expanding a business through business format franchising is quite different to other forms of development. Many business concepts are better suited to licensing, agency or distribution type arrangements.
This is particularly true where the company in question is establishing its business in new areas through people who are granted the right to sell their product or service as a bolt-on to existing business activity. It may also be that the parent company is simply interested in additional product sale without the provision of any structured ongoing support programme.
In contrast, business format franchising involves the replication of a business system in which the franchise owner is trained to become confident in the A-Z of the operational method. This should then result in a high degree of uniformity of corporate identity and services delivered in association with the brand. In considering the expansion of a business through business format franchising, the following key factors need to be understood.
There needs to be a tried and tested business system in which management have gone through the learning curve, identified the pitfalls, found solutions and have a success formula in place.
Successful franchising requires franchisor management to provide a solid ongoing back-up and support function. Franchise owners are 'on their own but not alone'. They typically should have in-territory field visits, ongoing communication from head office, a constantly updated Operations Manual, regional or national conference provision, a system for reporting and analysing the key performance indicators and the benefits of a research and development programme that ensures Franchise Owners are kept at the cutting edge of developments in their sector.
Franchising requires management to realise that to launch a business format franchise with the responsibilities of recruiting, training and supporting a network of franchise owners involves the establishment of a new business. The franchise business is separate to the existing company-owned trading operation. It requires focus and dedication to make it happen. Development of one's business, therefore, into franchising is a major management decision with respect to time and capital for the development of the franchise documentation and infrastructure.
Franchise owners should be provided with a comprehensive training programme in which they are taught such things as: knowledge of the sector, the target market, local pro-active promotional activity, the sales process, maintaining corporate standards, delivering the required customer experience, building repeat and referral business, understanding the key performance indicators, use of appropriate software, the admin system, reporting procedures to franchisor, business review and forward planning. Such training is generally delivered in a classroom style format, but is often interspersed with hands-on experience on the shop floor or in the field.
In-territory Launch Programme
This should be included within the franchise package content. Franchisor personnel in the launch phase should visit with the franchise owner in-territory, gain an understanding of the local situation, provide hands-on help in the launching phase and so provide help and advice that provides the best possible opportunity for a successful business launch.
The Franchise owner will trade under the corporate identity of the brand. It is, therefore, of vital importance that the intellectual property rights are protected. In particular the trademark/name should be registered on the EU or British trademark registry as appropriate. The perceived value of the brand is enhanced when the ® appears beside the mark.
The business model that is going to be franchised needs to have been piloted. This should involve an operation managed at arms-length and separate to the original company-owned outlet. Such a pilot can be under company-owned management or be implemented through one or more Foundational Franchise Owners. The pilot should demonstrate that the business system can effectively be replicated and its historical trading performance shows the viability and profitability.
Gordon Patterson and Gary Rigby, as Partners of FDS Southern, have guided many companies in the evaluation of their business suitability or otherwise for franchising. They have then implemented the franchise development programme necessary to provide each brand with the best opportunity to achieve successful development through business format franchising.