Franchising provides a genuine means of expanding a brand and building a capital asset. So how do you get started?
It’s a proven and established method of distributing products and services and with turnover exceeding £15bn per annum, employment over 600,000 and more than 32,000 franchisees in the UK, this is a substantial sector. Moreover, whilst some four out of five independent business startups go bust within two years, research proves year after year that over 90% of franchisees are still trading.
Franchising is unquestionably a successful business model but you can’t just simply franchise any company – to succeed there is a process. To start with you need to get a basic understanding of franchising, what it entails, the relationships involved and the commitment required by you, the franchisor.
Critically, of course, ask yourself the question: is my business franchisable? It must be repeatable, have a proven business system, appeal to a wide cross-section of people and have access to a large enough market.
A robust and proven business system is mandatory – a good product is no guarantee of success but a poor system means almost certain failure. Your method of operation must be fully documented and the franchisee must feel confident about success from following the system and the manuals.
You need formal documentation, not least a franchise agreement, to detail responsibilities between franchisor, franchisee, suppliers and customers. If you’re happy you have a robust business that’s franchisable within a large and growing market, which you can professionally write the manuals and other materials for, then the fun really starts.
It should be said though – creating a franchise from scratch is expensive. Funding is critical and, in my experience, you cannot create a proper and ethical franchise on the cheap. Then there’s the hairy issue of recruiting franchisees – no recruitment, no franchise. It’s that simple.
You need to invest and you need to be single-minded – don’t accept weak franchisees, don’t change the franchise agreement for individuals and don’t bend your own rules. Franchisees want and need strength, vision, support and a solid business system.
If you get this far then take advice, talk to the bfa, visit a specialist franchise lawyer, speak with knowledgeable banks, meet with a good accountant and talk to other long-established franchisors.
Finally, remember franchising is all about getting the process right so if you want to be a successful franchisor – follow the process.