Considering franchising your business?
Making the commitment to transforming your successful business into a franchise opportunity will have huge consequences for the future of your company. Roy Seaman CFE suggests seven key questions you must answer when considering taking the franchise route
1. IS FRANCHISING YOUR BEST CHOICE?
If you are considering how best to expand your business, there are any number of options and it is important to consider them all and make a decision based on a proper understanding of their requirements. The basic criteria for a franchiseable business is a teachable concept that operates in a market with good margins that can be shared between the franchisor and the franchisee. If your business does not meet these criteria, then you may wish to consider other methods of expansion such as creating additional company-owned outlets; joint venturing; appointing agents/distributors; or licensing.
2. HOW WILL YOU FRANCHISE YOUR BUSINESS?
Should franchising be the most appropriate route to follow, then there are a number of different ways in which any business can be franchised so consider what format will most suit your business model. Perhaps your business will be most effective developed as a hands-on 'job franchise', in which a large network of franchisees are trained in the practical provision of the product or service within serviceable areas. Or maybe your franchisees will be more effective operating 'management franchises', where they build a business, training and supporting staff serving larger territories. The style of franchising you adopt will depend on the industry sector, the type of people you are seeking to become franchisees and the specifics of the business model.
3. CAN YOU IDENTIFY STRUCTURED SYSTEMS AND PROCEDURES AND TRANSFER THEM TO FRANCHISEES?
It is most important that your business concept is totally teachable to the franchisee - the main reason why franchisees will buy into your system is that they want to follow your proven profitable frameworks for successfully running the business. Give some thought to the uniformity that exists in a franchised McDonald's restaurant. The average age of a restaurant team is probably around 20, but the consistency of what you are served with needs global standards. The challenge with any franchise is to develop systems that will take care of your knowledge and experience, then systemise what you would like to be done in a way that can be repeated over and over again. This is why at the heart of every franchise are detailed operating and training manuals that will ensure that your product or service can be promoted and sold over and over again following essential guidelines.
4. ARE YOU COMMITTED TO CHANGING YOUR ROLE FROM RUNNING A BUSINESS TO RUNNING A NETWORK OF FRANCHISED BUSINESSES?
Are you willing to become a leader of your franchisee network? As your network grows your time will be taken up more and more with recruiting, training and supporting your franchise network rather than running your own business. Even early on your commitment to the franchise will need to be significant as you develop and deliver your initial and ongoing training programme to enable your franchisees to operate your business concept in their geographical location after they leave your offices. Most instances of franchisee failure are due to a lack of initial and ongoing training from the franchisor, so the work you put in early on in developing comprehensive and professional training programmes and operating manuals is vital for improving your franchisees' chances of success.
5. ARE YOU MEETING THE LEGAL REQUIRMENTS OF FRANCHISING?
Although there is no franchise-specific legislation in the UK, your legal position must be clarified before you start offering franchises. For example, if you do not own all of your intellectual property rights, then you are not in a position to move forward. There are a number of elements that you need to protect before suggesting to investors that you own those rights.
6. DO YOU HAVE THE RIGHT ADVISORS IN PLACE FOR YOUR FRANCHISE DEVELOPMENT PROGRAMME?
Many prospective franchisors start off believing that hiring a lawyer to draft an agreement will be enough to create a working franchise. While lawyers (and accountants) will be brought in as professional advisers in due course, they cannot offer advice on the commercial reality of developing and running a successful franchise, especially achieving a fair balance between the interests of franchisor and franchisee. By engaging an experienced Franchise Consultant you will be bringing an expert who can provide commercial advice focused on getting your franchise right first time.
7. ARE YOU PROPERLY PREPARED AND FUNDED TO DEVELOP A PROVEN FRANCHISE OPERATION?
It is one thing to run your own business and something entirely different to create a pilot franchise operation. To become an effective franchisor will take time and understanding, so you should always begin piloting your franchise concept as soon as possible so that you can iron out any problems before you take on too many franchisees. If you feel this will hold back the growth of your business, you can always pilot more than one location before you offer your franchise opportunity.