Can your Business be Franchised?
If yours is the right kind of business, franchising can be an extremely effective method of expansion. But what is the ‘right kind’ of business for franchising, and how do you know whether yours is one of them?
Success to Date
First of all look back at your company’s history. Has it been trading for several years and does it show a healthy year-on-year growth pattern? Are you clear in your own mind about what actions have secured that growth and why your strategy has been successful? If so, you may well have a healthy basis for franchising – but if you don’t know these answers, how can you possibly produce a model for franchise owners to follow?
Next consider your market and take a look forward. If you are currently trading in one particular geographical region or market sector, what evidence do you have that your business will work equally well elsewhere? Is the requirement for your goods or services likely to continue (and ideally to increase) at least for the foreseeable future? If not, or if you are at all uncertain, maybe you should consider selling your business rather than selling franchises!
How about your profit margin? Franchising is a system whereby both sides take a share of the profit. The franchisor trades off some of his profit percentage in return for scaling up the whole business. In other words, he agrees to take a smaller percentage slice of a much bigger cake. All of which works very well if the gross profit in your underlying business is reasonably healthy - but if profit margins are thin, franchising can be difficult.
What skills will your franchise owners need in order to run the business as well as you do? Do you have a very special talent? Or has it taken many years of training for you to acquire the skills needed to operate your business? If so, the business may not lend itself to franchising – at least, not unless you can find some way of de-skilling the franchise owners role (for example, by doing the more complex tasks at head office level). As a general rule, it should be possible to teach franchise owner’s your basic operating systems in less than six weeks. Would that be true of your business?
Can you Spare the Time to do it?
Ok, so your company ticks all the above boxes, but there is one more very important thing to consider. Have you actually got the time to franchise it?
Planning and Preparation
Even if you work with an experienced Franchise Consultant (and you certainly should), franchising demands a great deal of time and effort – your time and effort. However good your consultant, you need to work closely with them throughout the planning stage, making certain that the final franchise model is exactly as you want it to be. You must also provide maximum possible input during the preparation stage, ensuring that you personally are fully committed to the contents of the Prospectus, Agreement, Manual, Offer Document and all the other franchise elements. All this is far from easy when you are already very busy running your existing business!
Launching the Franchise
The most important stage is yet to come. It’s the actual launch of your franchise. You need to select your franchise owner very carefully – and your initial intake of franchise owners will be critical to your ongoing success. Franchise owner recruitment and their initial training are tasks that are far too important for you to delegate to others - indeed, as a right–thinking franchisor you should not even consider doing so. So that means even more work for you!
Is it all Worthwhile?
Speak to any franchisor who has taken the franchise route for the right reasons and in the full knowledge of what it involved...and your answer will be a resounding YES.
Amazing Service Levels
By franchising, you are inviting people to invest in your business. Employees do not do this. As a result, your franchise owner will have a degree of commitment to the business which is second only to your own. This high level of commitment will reflect through into every aspect of their work. Franchise owners will never be disloyal to the brand because it is their brand, they will maximise selling time, they will not incur unnecessary expense and – most importantly - they will provide customers with an amazing level of service!
All this can, and should, enable you to scale up your business from local to nationwide – quite rapidly and very cost-effectively by comparison with the alternative of company-owned expansion. But despite the growth of your business, the very nature of the franchise organisation means that your head office costs do not have to grow with it. Most franchise head offices – even for some of the best known brands – are relatively humble in size and staff numbers. This is because, by using a franchise structure, the central management task (and therefore its cost) can be greatly reduced.
So, all your hard work spent preparing the franchise should eventually pay off, quite literally! But only if you have the right kind of business in the first place, are willing to commit your personal time and energy to launching the franchise, and are able to provide your future franchise owners with real ongoing support.