A suitable business strategy?

For those with an existing business, franchising may represent the ideal model for growth whilst also securing the future of the business. Franchising is successfully used by many businesses in a variety of markets as a means of expanding their operation and can turn a small business into a major brand.

How to determine whether a business is franchiseable

1. The business needs to be proven – an idea cannot be franchised. Potential franchisees must be able to see that the business works in the way in which they will need to run it
2. The business must be transferable – it must be capable of being run in multiple locations, using the same system, brand and quality
3. The franchise must be something that people can be taught to do – there is little point having a franchise that only three people in the world would be capable of running

If the business passes these three simple but vital tests, then consideration can be given to the practicalities of turning it into a franchise. This process will require the production of operation manuals, to show how everything must be done, and a franchise agreement will also need to be written to set out how the relationship and agreement between the franchisors and franchisee will work. It is also there to protect the network and the brand. This will require expertise from solicitors and consultants.

Franchising versus alternative business expansion methods 

One of the biggest practical differences between a simple distribution scheme and a fully fledged business format franchise is the extent of the initial and continuing support services offered by franchisors to franchisees. 

Franchisors take on responsibility for product and service development, national promotion and PR, the purchasing of financial and administrative services, quality control and national accounts, as well as network communications and discipline. Inevitably, there is an investment involved in making sure the necessary support services can be delivered to the first franchisee as well as the fiftieth. 

The extent of support offered varies according to the type of business and how it is structured. A job franchise network (where, for example, the franchisees do the drain cleaning) may offer more administrative and financial services to its franchisees. A management franchise (where the franchisees employ and manage) may provide training and support focused to more specific needs, such as staff selection. 

The franchised business will be structured so that franchisees need the services of the franchisor on a continuing basis and, consequently, will be happy to continue paying to belong to the network. 

The benefits a franchisor can offer franchisees

The principal benefit which franchisors offer for prospective franchisees is the opportunity to run a business which has already proved its capacity to deliver products or services profitably to an identified market. 

The franchisor is continuously building a brand that people want to buy into – they must, therefore, create a brand which is distinctive and appropriate for all the places in which they wish to have franchisees in operation. 

Considerable development work is required before a franchisor will be in a position to draw up offer documents and begin recruiting franchisees. Below are a few considerations which aspiring franchisors should bear in mind: 

1. Time and money – both will need to be invested in the business before an income stream starts. In particular, market research studies; pilot schemes; promotional/ advertising material; an operations manual; the formation of a central management team and the purchase of initial stock and equipment will all need to be undertaken before a franchise network can be developed
2. Territory – how will areas be set out? Franchisees may need to be limited to specific geographic areas in order to successfully establish an entire network
3. Training and support – this is critical in ensuring the success of franchisees. Investment in this area is particularly important and thought must be given to their core requirements, both to get them up and running and then on an ongoing basis
4. Franchisee recruitment – this takes two forms: (i) the staff that may be required to support the franchisees and ensure a healthy network and (ii) the recruitment of franchisees themselves 

The franchise industry continues to grow and even in tough economic times it is proving to remain robust. There are now a multitude of different business types using franchising, and it continues to increase. As a model for business growth, or a new route to be your own boss, it remains successful, but only when done well.