Considerations when franchising your business
British Franchise Association
Franchising can not only strengthen the brand and reach of a company, but it can also act as a very good method of securing its future. If done well, franchising can turn a small business into a major brand, but what does it take?
The first thing to understand is that franchising is not a tool to fix a bad business. It is not there to provide injections of income from other people to underpin failings elsewhere in the business. The franchising model is used to replicate a successful and proven business, using the investment and skills of new individual business owners, who will be trained and supported to run the business under the agreement, conditions and format, as proven and agreed.
To be capable of being franchised, a business must meet the following criteria:
- The business needs to be proven - you cannot franchise an idea – you need to show potential franchisees that the business works in the way in which they will need to run it
- It also needs to be transferable, i.e. capable of being run in multiple locations, using the same system, brand and quality
- The franchise also needs to be something that you can teach people to do. There is little point having a franchise that only three people in the world would be capable of running.
If your business passes these three simple but vital checks, then you can start to look at what you need to do in order to turn it into a franchise. Firstly, you need to consider whether franchising is right for your business and understand the necessary skills and business culture required to be a successful franchise operation. You will also need to have a sound appreciation of the franchisor-franchisee business relationship, which is key to the success of the franchise network. If you are investing in franchising your business, then you will need to make sure that your franchisees succeed and the correct planning will go a long way to ensuring their success.
If franchising is the right route for your business then you will need to offer franchisees a business format which includes:
- Your brand - franchisors take on responsibility for all brand-related aspects, including product and service development, quality control, national promotion and PR
- A business system – including an operations manual which sets out how everything must be done
- Support services – the extent of support offered varies according to the type of business and how it is structured. Training as well as technical and business support, are all the responsibility of the franchisor. You will also manage the purchasing of financial and administrative services and control national accounts. Network communications and discipline will be down to you and you may also need to deal with disputes and account manage the franchisees’ own commitment and enthusiasm
All of these elements will be contained within the contractual terms of the franchise agreement which will, amongst many other things, set out the how the relationship and agreement between the franchisor and franchisee will work as well as the financial details. The agreement is also there to protect the network and your brand.
As a franchisor you will be building a brand with a reputation that other people will want to buy into. You will, therefore, need a brand which is distinctive and appropriate for all the places you would want to have franchisees in operation. It will also be your responsibility, and your obligation to franchisees paying for the benefit of using your brand, to protect it against abuse, both by outsiders and by ex-franchisees. You will, therefore, need specialist advice on protecting your trade and service marks.
You will also need to make sure that your franchised business is structured so that your franchisees need your services on a continuing basis and, therefore, will want to continue paying you to belong to the network. Professional advice at the outset could save you a great deal of money and trouble in the long run. A list of the bfa’s accredited Affiliate Members is available to assist with this process.
Although expansion through franchising can be less expensive than organic business growth, it still isn’t cheap and is not an overnight process. There are numerous up-front costs, some of which have been discussed, and to franchise a business properly takes a lot of investment and effort. That said, it can provide growth that you couldn’t even dream of through the usual organic methods. It is vital to plan properly, get the right professional advice and have the appropriate support and finance in place to see it through. If done properly this could be one of the most successful strategic decisions that a business makes.