Franchising guru Richard Pakey asks whether a successful local business can be converted into an equally vibrant and prosperous national franchise network.
Franchising is definitely not reserved for household names. If you’re an independent business owner, and the company is performing well at local level, then it may be possible to turn your enterprise into a franchise operation. And it’s certainly worth investigating. It’s also possible for you to achieve this objective within a matter of months. Instead of being a single location business owner, you could soon become a franchisor directing and assisting a number of franchisees.
Franchising is one route for growing your business and it is increasingly becoming a more popular option. However, not all businesses lend themselves to franchising and before making a decision – one way or the other – you will need to do your research. Having a great business model is certainly a significant step towards converting your operation into a franchise. But there are other factors too. I always think the best way to determine whether your business can be converted, is to visit a franchising consultant for further clarity, guidance and support.
A consultant will assess the viability of recruiting franchisees, which is a key part of becoming a franchisor. Don’t forget, a franchise consultant will only want to become involved in recruitment if they themselves are confident in attracting and finding good quality franchisees. The last thing they want is to waste time and energy chasing shadows and empty chairs. If a consultant doesn’t believe in your business, then they may have some issues and reservations about upgrading it into a franchise operation.
That said, the majority of successful businesses can be franchised. One of the benefits of franchising is being able to launch your brand on a national scale, potentially even internationally. The role of a franchisor is to work with franchisees who pay fees to access your already successful business model, while tapping into your knowledge, experience and expertise. You will also be providing ongoing assistance, so there are plenty of things to consider before taking the plunge.
Have a long hard think about whether you really want to expand your business. Being a franchisor does provide you with a certain degree of control but, of course, the business may well develop into something far removed from your initial plans. This may be good and usually is but, at times, can be detrimental if matters get out of hand.
The last thing you want is for the whole network to come crumbling down around you. Unflattering press reports can affect the brand adversely which means even your own local office will take a hit. At times like this – and thankfully such moments are extremely rare in UK franchising – you will probably wish you’d remained a local, single enterprise. But, of course, it’s far too late and you’re in it up to your waist, possibly even higher.
You also need to think carefully about the commitment being made by a franchisee who may be re-mortgaging their house and/or taking out a sizeable bank loan to start their new business. These men and women are launching businesses of their own and, despite paying fees to access your expertise and proven business model, they are still taking a risk.
You will need to know whether your own business has the ability to be transported to another location and still operate in much the same way, serving the local population. And if your business depends on bricks and mortar, you may want to visit a few other towns and cities to check out whether potential locations exist – or whether your company is largely unique to your own local area. Property and rental costs vary and may need to be researched to check whether prospective franchisees really do have a viable proposition in other regions.
During the pandemic, food-based businesses have tended to be extremely resilient, providing opportunities for new business partners to set up as franchisees. Franchising is no ‘get rich quick scheme,’ ask any established franchisor. It’s no different to building any new business, as there are plenty of challenges to face and overcome. So before you take the plunge from being a single business owner to becoming a franchisor, ask yourself this question: Do I really want to go through this business building process all over again?
If the answer is ‘yes’, you’ll need a marketing budget to generate franchisee interest. You will probably also need to beef up your head office team, to demonstrate to budding franchisees that there is an operation ready and waiting to advise and support them. Franchisors, not just new franchisees, require a certain level of cash flow to keep them trading while waiting for incoming fees to arrive.
You will probably require a 10-year business plan for supporting franchisees. However, providing you maintain a high level of attention to detail, and you’re prepared to work long hours at the start, then the rewards are certainly there. You may already be planning a long term exit, while wondering what profits can be generated on the sale of a successful franchised business. But I guess that’s a topic for another day.
It appears we may be slowly moving in the right direction, regarding the pandemic. Franchising has remained remarkably resilient throughout the past 12 months, and there are just as many franchisee enquiries now as there were before Covid-19 arrived in the UK.
Whatever your business plans for the future, please consider the option of franchising – whether as a franchisee or perhaps turning your company into a franchised brand. There are many consultants out there ready to chat and explore the options with you. Most businesses can become franchises, so give it some serious thought. In fact, it may be possible to franchise certain parts of an enterprise, while retaining the core element of the business as a single company. The options are plentiful, why not check these out.
