What should you consider when franchising a business?

There are a number of things a potential franchisor should take into account when entering the world of franchising

What should you consider when franchising a business?

Over the years, I have met many people who have built up successful small local businesses and have then thought about franchising as a means of expanding the brand and building themselves a serious capital asset. When asked to advise on whether and how a particular business can be franchised, I consider nine key aspects.

First of all, you need to have an understanding of how franchising works, the level of support you should look to provide and the controls you need to put in place. Additionally, the business also has to be ‘franchiseable’. I struggle to see how brain surgery or something that is innately ‘creative’ could possibly be franchised because the inventiveness or initiative of the individual is essential to the business. To franchise a business, it needs to be replicable and something that can easily be mastered by a wide cross section of people.

If you think you understand franchising and believe your business can be franchised, then you need to determine the marketplace. It must be large enough – or potentially large enough – to accommodate a number of franchisees. I would also advise against franchising in a market that is niche or influenced by fashion.

If you can tick all three of the above then your next priority is structuring your franchise model. The first thing you will need is a manual. Your method of operation must be fully documented and the franchisee must feel confident that if they follow the system they will achieve an element of success. Suffice to say, it should cover all key business disciplines involved in the business. You will also need formal documentation – not least a franchise agreement – to detail responsibilities between franchisor, franchisee, suppliers and customers.

Then of course you need to work out how you are going to recruit franchisees. My advice here is to recruit people who have the same passion and pride for the business as you do. That is not easy and certainly it is not cheap – you will need to consider a number of different routes, including exhibitions, magazines, websites, press and direct marketing.

The whole process of creating a proper and ethical franchise can certainly cost a bob or two and when it comes to funding, I estimate that you need between £80,000 and £150,000 for the first year – depending on how much revenue you generate yourself.

Should you get to the point where you decide to go ahead then I would urge you to take professional advice. Talk to the bfa, visit a specialist franchise lawyer, speak with knowledgeable banks, meet with a good accountant and speak with other long-established franchisors.

Last but not least, this is your business so be single-minded. Do not accept weak franchisees; do not chop and change the franchise agreement to suit the wishes of individuals; and do not be tempted to bend your own rules. Franchisees want strength, vision, support and, above all, a solid business system.

Nigel Toplis
Nigel Toplis