Intricacies of setting up a Franchise Operation

A franchise business can be established in two different ways.

In the first method, a franchisor with a well-established business wishes to expand his network with the help of business format franchising.

In second case, there is a newly formed company, or maybe an existing company which does not have ample or no experience in its nature of business activity, and wants to enter into this area through business format franchising.

Of the above mentioned two methods, it is always advisable to opt for the one to run a franchise business successfully. Importantly, a business plan needs to be created that should embrace the following details:

•    Why do you want to opt for franchising? •    Whether your products or services can be distributed through franchising? •    What is your proposed management structure and how do you prove its soundness for a franchise business?

A franchisor is required to develop and clearly define its franchise business by starting off with a pilot operation. A pilot operation is basically a company-owned outlet, which is operated as a franchised outlet. Pilot operations generally do not prolong for more than two years and there should be ideally only one pilot operation to be conducted.