Franchise Consultants - A guide to Business Format Franchising

Roy Seaman, director of Franchise Development Services, explains all you need to know and understand in relation to Business Format Franchising and the real value of Franchise Consultants.

Franchising and Franchise together with other variations are often used to refer to a type of business or opportunity. Strictly speaking the 'Franchise' is the agreement or licence that is granted between the Franchisor (owner of the brand, methods and systems that must be followed when supplying or delivering the product or service) and the Franchisee is the person who will own those rights in their particular area.

The Franchisee has the obligation to pay the Franchisor an initial sum of money for the right to own and operate the business and then pays to the Franchisor additional sums of money that have been identified as essential so that the Franchisor has every opportunity to help the Franchisee establish the business in the predetermined location. Franchising is not an industry but a Sector.

Franchising is a way of doing business - a method of sales, marketing and expansion.

Business Format Franchisees not only sell the Franchisors product or service in accordance with the Franchisors trademark, systems and frameworks but operate the entire business as detailed by the Franchisor. The Franchisor provides initial and ongoing training, operating and marketing manuals, all of which must be strictly followed.

There are many examples of Business Format Franchising from Automotive, Business to Business, Cleaning and Maintenance through to Food and Drink, Homecare, Health and Beauty and of course Retail and Fashion, Sales and Distribution and very specialised sectors in niche markets. Franchise Development Services publishers of The Franchise Magazine totally dedicate themselves to all aspects of Business Format Franchising.

The typical Franchisor will have laid solid foundations and proven beyond any shadow of a doubt the viability and profitability of the opportunity that they are offering to new Franchisees. They may well have established a number of company owned outlets before offering their Franchise to investors who are the Franchisees.

Some Franchisors are Master Franchisees who have purchased the Rights from overseas brands and they do not offer Franchises but develop all of the outlets themselves as company owned Franchises. Examples are Bo Concept, Pizza Hut Restaurants, TGI Friday and many overseas Fashion Brands. 80% of Franchises outlets however, in the UK are owned by independent Franchisees. The remainder are owned by the Franchisor.

The British Franchise Association is the best way to identify the credibility of a Franchise. If a company that is offering a Franchise is not a member you should ask why. There is in fact no real reason why any company that is offering a genuine Business Format Franchise should not be a member of the British Franchise Association. That is why you will see such Brands as (McDonald's, Kall Kwik, Burger King and Chemex) proudly displaying their BFA logo. These will mostly be full members of the BFA. There is then a category for Associate membership for those companies that have laid a solid foundation and have proven over a number of years their credibility in the marketplace. Then there is the provisional listing for the new entrant to Franchising that has a well structured business and is endeavouring to lay the foundation and offer a genuine opportunity.

However, prospective Franchisees need to be alert to the fact that more than 40% of Franchisors that are not members of the British Franchise Association within a 3 year period. The majority doing so because of the following three reasons.

1.Lack of Knowledge:
The intending Franchisor has not fully understood all of the requirements necessary in order successfully Franchise a Business.

Most businesses can be Franchised in a number of ways. There are 21 key areas in which solid foundations must be laid before a company goes to market and offers their Franchise. If little or no time has been invested in thinking through the best way to proceed, then what is being offered is a theoretical opportunity that is often unproven and will become unprofitable.

These Franchisors are, we could say, failing due to a lack of knowledge. All of the advice, guidance and knowledge that they should have called for is readily available from experience Franchise consultants. Those consultants will in turn recommend the emerging Franchisor to apply for appropriate BFA membership as and when that criteria is met.

2.Lack of Funding:
Some companies recognize the need for the necessary infrastructure covering those 21 key areas but do not have the funds available.

They therefore put together a successful Franchise package which has a relatively low investment level but with high financial projections. They then embark upon selling the Franchise as best they can, or on a special offer and these new Franchisees are unwittingly funding what the Franchisor hopes will be a success. Unfortunately the vast majority of these come tumbling down very rapidly sometimes within a year..

3.The third reason for failure is speed.
Many Franchisors fail to appreciate the amount of time that is required to lay the solid foundations and then recruit their first phase of Franchisees. These Franchisees are the second area of solid foundation and it takes a full year for the Franchisor to train and bring them up to predetermined levels of training, trading and profitability.

A credible Franchise Brand will achieve the goal of establishing say 4-5 Franchise outlets then stop recruiting until such time as that first phase of Franchisees achieves success. Then the Franchisor can learn from that experience and if necessary restructure, alter and amend the Franchise package being offered and then embark upon phase 2 of their Franchisee Recruitment.

However do not assume that because a Franchisor has achieved BFA membership status that you have an opportunity that is destined to succeed. The Franchisor should have a team of people at their head office who you would meet with and feel comfortable with in relation to their ability to work with you in achieving your success.

You should also look at their professional advisors and most importantly their Franchise Consultants. Meet with them, talk with them and receive their professional opinion. So your first method of estimating the credibility and intelligence of your Franchisor is to look at the Professional Advisors around them. Do not be mislead by Franchisors saying that you can leapfrog to success. You and they will have to take one step at a time and then move realistically towards your goals of turnover and profit.

You should never become excited about a Franchise opportunity that you have just read about or seen at an exhibition. Look at all of the Franchise opportunities available as portrayed in The UK Franchise directory so that you do not discover having invested in one Franchise that there was an even better on the next page!.

Should you wish to take advantage of our experience then we can provide you with advice and guidance in relation to any of the 1,000 Brands on the market. Simply call 01603 620301 or email and ask for our 'SAFE' Service. This is the 'Sensible Approach to Franchisor Evaluation' and our Professional Opinion will be based upon current information held on the Brand of interest as well as over 25 years experience in the market. Ask for Roy Seaman when you call or email us with a telephone contact number and the best time to call you.