Franchising can be an excellent way to grow your business and achieve greater market penetration. But it’s not just a case of heading out to some trade shows, getting yourself listed on a few franchising databases and waiting for a tide of franchisees to sign on the dotted line. For new franchisees to stand a hope of replicating your success, converting your existing business plan to a workable franchise concept is absolutely vital.
Off the bat, it’s worth establishing what is actually a franchiseable concept. One of the most fundamental things people miss is making sure they have some protected intellectual property (IP) at the core of the business. “There has to be a brand in place,” says Euan Fraser, managing consultant at franchise consultant AMO Consulting. “There’s often a problem with people not having registered their trademark; they’re still back in the Middle Ages of ‘I’ve got a company name therefore I’m protected’.” Given a significant part of the value of your business will lie in its IP, this isn’t something that you can afford to overlook.
It may sound like an obvious point but, again, it can’t be overstated that your business needs to be turning a profit. “It’s not a case of ‘I want to gain market share, I want to make some money in the process: I’ll franchise’,” comments Suzie McCafferty, managing director of franchise consultant Platinum Wave. “The business has to be a profitable business model that can be rolled out in other areas.” However, a healthy bottom line today isn’t the only concern; the concept needs to have longevity to guarantee that it will remain profitable in the future, instead of just being a flash in the pan. She says, “A passing trend or fad is not going to work in franchising because generally we sign a franchise agreement for a minimum of five years.”
However, perhaps the most vital element is ensuring there is something unique about your offering, that will keep your franchisee engaged with your business for years to come, not just the minimum term. “It has to be something different,” says Fraser. “There has to be a hook to keep the franchisee tied in at the end of five years, not just go off to Spain for a year, spend some money living it up and come back and set up in competition.”
These points help form an important first evaluation of the efficacy of your tested business model and begin the process of producing a rounded franchise concept. “It’s a matter of measuring the business against these criteria and seeing where the gaps are,” explains Fraser. “Because in all of them, there will be a gap, there will be something that’s missing and that needs to be plugged to start with.”
But obviously, there’s more to work through than just the glaring holes in your concept. Something that will need real attention is how you communicate these elements to your franchisees because leaving an element of ambiguity only serves to undermine the huge amount of work one has put in to develop effective processes.
“Many business owners have a lot of great information but it’s often stored on spreadsheets or in their mind,” comments McCafferty. “An operations manual is crucial because it details everything that’s required for a franchisee to run their business from the minute they go to work in the morning to the minute they finish up at night.”
Whilst certain things may seem obvious to an entrepreneur, expecting a franchisee to automatically land on the same processes and solutions as them is woefully unrealistic. “There is a truism that if you don’t teach a franchisee the right way to do something, they’ll do it wrong,” says Fraser. As with any brand, having a high degree of consistency between outlets is essential and this cohesive approach can only realistically be expected if there is an in-depth plan in place. “If we say the flooring must be wood and must be mahogany then it must be wood and it must be mahogany. It’s about detail.”
Something that also needs to be considered is the profile of your intended franchisees. Unique requirements need to be taken into account; whilst there is plenty of training that can be imparted as a part of a standard training process, not every industry is the same and some will require firsthand experience in the field, whether that’s accountancy or optometry. McCafferty explains, “It’s important to look at which franchisee is the right one for that particular franchise.”
One last point that needs some careful working through are the financial projections upon which a franchisor bases their offering. “These will be heavily qualified because the success is dependent on a franchisee’s abilities and the graft and effort the franchisee puts in,” comments Fraser. Because of this, it can be a legal area that might trip up the unwary. “The important thing is to disclose to the franchisee the basis of the figures. It is based on a specific store.”
And it’s important to have ironed out or, at the very least, clearly identified any biasing factors which may have influenced the results of a pilot. One thing Fraser recommends is that the entrepreneur removes themselves from the pilot as much as possible, allowing a more realistic picture of what can be achieved through the application of the system. “It should be an arms length pilot, taking somebody who doesn’t already understand the business,” he says.
Essentially, when trying to make the switch to franchising, a little careful planning can pay dividends. The effectiveness of a franchise concept rests upon the strength of its foundations. As McCafferty concludes: “It’s about replicating systems and procedures, using a brand’s knowhow, systems and marketing to build a genuine and successful business in the local community.””