Franchising
21 June 2010
Becoming a franchisor is a great way to grow your business. Franchising offers real growth opportunity but getting it right at the start of the franchise is important. The ability for the franchisor to be passionate about building a fantastic business for others to work in is vital to the success of the whole franchise network.
Business format franchising involves not only lending a name to a third party but also providing the franchisee with an entire system of doing business, using a common brand and common processes for marketing, managing and administering the business.
The success of a franchise opportunity is usually based on its ability to meet criteria in five key business areas, so when considering whether this is right for your business the first step is to carry out a diagnostic project to identify the market potential for your products or services through a franchise network.
The five areas are:
The business environment – will your existing operation lend itself to developing into a successful franchise operation? Consider your management style, if you are very ‘hands on’ you may find the change in culture an insurmountable barrier to success. A new business culture will be needed as you will now be starting and supporting new businesses rather than doing what you currently do.
Your products or services – are they suitable for franchising? If the market for your products or services is stable it will be more suitable for franchising. Niche or fashion products tend not to be readily franchised.
Sales and marketing – Can you answer yes to the following questions?
Is your overall market potential good?
Do you have a unique marketing approach?
Are your prices competitive, if not the franchise will not be able to complete successfully.
Is your sales process well controlled and monitored?
Finance – are your finances strong enough to support a franchise network and are the profit margins great enough to share between you and your franchisees? It can cost between £50,000 and £100,000 to develop a franchise network.
Administration – is your business system proven, robust and able to be learned by a franchisee? Are the day to day processes documented in an easy to follow procedures manual?
For a franchisor, franchising can maximise growth, increase profits and help you develop a very successful business. It is very often an extremely quick low-risk method of expanding a successful business across the world. The franchisees having the local knowledge and in return the franchisor offers a successful business formula that has been proven to work.
Before you go ahead, ask yourself whether the support, training, stock, experience and brand name justifies the investment needed and most importantly seek advice.