Introduction
This information is for existing businesses which might use the franchise method to grow or to become more competitive. Topics covered are:
You might also like to look at the list of Affiliate Members of the bfa for resources which may be of help, and also of attending one of the bfa's franchisor seminars. These are a very time and cost effective means of meeting the experts and also of talking to existing franchisors and franchisees.
The British Franchise Association Franchisors Guide which can be ordered on-line from the BFA Bookshop is also a source of useful reference information. Alternatively, it is available by post from the bfa at Thames View, Newtown Road, Henley on Thames, Oxon RG9 1HG, telephone 01491 578049.
The 2006 NatWest/bfa Franchise Survey reveals that franchising - currently a £10.3 billion industry in the UK - continues to expand in terms of franchise systems, units and sector turnover of employment. UK franchisors and franchisees are optimistic for the future, both for their own business and for the economy in general. 86% of franchisors say that expectations for their business will improve in the next 12 months. A total of 759 franchise systems have been identified - an increase of 13% since the previous year.
The franchisor selects the franchisees and retains control over his products and services. Since franchisees invest their own money and work for their own profit they are likely to be highly motivated to succeed. Centralised costs and overheads are usually lower for a franchise network than for a network of company-owned outlets - few skilled staff can manage the entire network from a single central office.
Is Your Business Franchiseable?
The franchise method is now used successfully by all sorts of businesses in all sorts of markets; but not all businesses are franchisable. If your business has one or more of the following characteristics, franchising may not be suitable:
- A product or service which is only likely to have a market for a short
time (e.g., toy hoola hoops)
- Gross margins which are too low to offer a return on investment to both you as the franchisor, and your franchisees (e.g. newspaper delivery)
- Skill levels for each operating unit that require very long training periods (e.g., management consultancy)
- Predominantly repeat business customers whose loyalty relates to the individual providing the service and which would be difficult to transfer to a brand (e.g. marriage counselling)
- A geographically defined market that doesn't have the potential to be repeated in many places (e.g. Tower of London)
- A business with audit and control requirements which are too critical to involve franchisees operating as separate legal entities (e.g., a bank)
- A business which is failing.
If you think your business might be franchisable then you will need to offer franchisees a business format which includes your brand, business system, and support services under the contractual terms of a franchise agreement which will, amongst many other things, set out the financial arrangement. Considerable development work is required before you will be in a position to draw up offer documents and begin recruiting franchisees.
Each of these topics are covered on the following sections.
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