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How to assess a management style franchise option?

on Thursday, 18 October 2018. Posted in Analysis

Joining a management style franchise option enables franchisees to work on their business, not in it. But picking the right one for you isn’t easy

How to assess a management style franchise option?

A management style franchise format would be very attractive to someone looking to set up their own business. But how do you assess that it is the right management model that would suit you?
Well, there are 11 things to look at to be sure.

(1) The market

First of all, look at the sector it’s in. Does it embody a growth market, does it have longevity and what are the market trends? Be sure to understand the key growth drivers in the market segment and look to longer term influences and potential growth in demand from that sector. Is the market recession proof? Does that market suit your own passions and interests? The market has to be right for you.

(2) Routes to market

Ask how does the brand or service reach out to its market. If it’s one particular route, it may be limited. The more routes to market then the less risk there is in building your own business. Assess whether those routes to market depend upon a specific skill that you may or may not possess. Does the franchise model automatically drive those routes to market and have they got the assets in place so that you do not have to re-invent the wheel?

(3) The product

There are two key elements to assess. First, does it provide your business with a key differentiator in the market. Competition is fine as it indicates there is a sizeable market, but you do need to have an advantage over your competition. Second, is it a standalone product or service? Do you have to deliver the product and is it dependent upon your knowledge and skills? The more it is self-contained and highly differentiated then the more you can focus on the growth of your business and not just on the delivery of the product or service.

(4) Automation

In order for you to maximise the value of your own efforts it’s those management formats that have the most automatic elements built into the model. The more that parts of the value creation chain are done for you then the parts that you do are more likely to focus on growth and wealth creation.

(5) Working in the business

Some management franchise models are more operative and less management. Look to how much of the value delivered to the market and how much it depends upon you working in the business. Be aware of so called management models that appear to be management models but require your own efforts to deliver the product or services. Some management consulting, procurement, tutoring and coaching models actually require you deliver the service.

(6) Working on the business

Assess whether the management franchise format has all the processes and assets you need to concentrate on the growth of your business. This means that you can concentrate on building your business working on it rather than in it. Ask about the business planning tools and processes and assess does it fit my own background and skills. Working on the growth of your business requires leadership and people management skills.

(7) Scalability

Ask if the management franchise model is scalable. If it is, say, a business to business service such as consulting, procurement, e-commerce or apps delivery then you are the unit of production and you are only scalable to a level of the number of hours you can execute. It is in effect a job not a management franchise. Ask yourself about how can you scale the business and not be part of the delivery?

(8) Economies of scale

Assess if there are advantages to being part of a management franchise network. Are there economies of scale where the group purchasing or continued research and development create new values for your business. Ask if there are a continuous number of new products and services you can add to the business may create new revenue and growth opportunities.

(9) What are the growth levers

Consider what assets you need to grow your business and assess whether the management franchise format has the number and quality right for you to build your business quickly. Ask and delve into what drives sales and new customers and assess the assets that are already in place. Ask how much you have to do and how mature the overall franchise is on delivering high quality assets to grow your business. These assets may be product presentation, sales materials, marketing or training assets, google and SEO, website, videos and social media presence, business planning and finance tracking or other administration assets. These are growth levers for you to use and maximise value and should be at the highest level of quality.

(10) Multi revenue opportunities

To manage and grow a big business needs a larger number of products and service lines to take to market. Ask about the depth and quality of the products and services you can take to market. The narrower the service line mix then the greater the risk to your business and the more likely you will have to work in the business to make ends meet. A wider set of service lines and products gives you the ability for longer term success in the market. Multi-revenue opportunities de-risks your journey and sets you up for continued growth and success. A narrower set of products and service increases the pressure and risk to success of your business.

(11) Next best option

Assess the management franchise model comparing from an opportunity cost perspective. Management franchise models have an intrinsic benefit over corporate life. You are the master of your own destiny and get the benefit of your management and leadership skills in a management franchise model. Corporate life is far more turbulent, uncertain and inherently more risky than a well-crafted franchise management model that suits your own skills and passions in life.

The final thing to assess is there good fit to you? Is it in an area you have a passion for? Would it suit the family and deliver a lifestyle that benefits everyone in the family? Is it the right time in your career and do you have the right skills to succeed? Over to you.

This article comes courtesy of Sport4Kids, the franchise on mission is to revolutionise children’s sport and build confidence in every child.

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