Richard Pakey of Lime Licensing analyses the relationship between franchisor and franchisee, and everything else that goes with it.
Glad to see the back of 2020 and keen to start your own business. Then why not consider franchising. Here are a few pointers which should help you discover if this sector would suit your needs. By taking the franchising route you should certainly be up and running quicker than if you decide to go it alone. However, franchising is not for everyone. Let me explain:
Franchisors and franchisees
Developing a strong relationship between franchisor and franchisee is important to those on both sides of this fence, and will ultimately dictate the overall success of the company. Both parties should try to make this connection as solid as ever. As franchisees find their feet, contact between the two will be less frequent, with the franchisee becoming more independent over time. But it’s vital to maintain a good relationship, as rarely does anyone gain from a business going horribly wrong, and it’s a great place to be when success is shared. Do everything to prevent the franchisor-franchisee relationship from turning sour, because a strong bond will help to drive the business forward.
It can be win-win for both parties
I’ve asked myself many times what it would cost to start the same business, using the identical franchise offering available to new business partners. And every time I do the maths, I discover that the initial investment made by a franchisee is minimal compared to going it alone. This reaffirms my view that there is a clear advantage for a budding franchisee to purchase a franchise. The same advantages apply to the franchisor who won’t hit the jackpot with a single franchise sale, but will benefit when the same principle is multiplied many times across the UK – and sometimes beyond.
You will not own the ‘brand’
There will always be some restrictions as a franchisee. For example, there will be marketing restrictions because the franchisor must ensure that the brand’s reputation is protected at all times. Franchisees may also have territory restrictions. It is the right of the franchisor to decide on the size of every territory, so that franchisees don’t come into conflict with any of the other business partners within that company. But franchisees should always feel confident that there is enough attainable business available to them, so they can replicate the successes of existing partners.
What you can control
The franchise will always be your business. You can control cash flow, and perhaps have some level of autonomy over marketing and advertising. But you should always be guided by the franchisor who has many years of knowledge in understanding ‘returns on investment’ (ROI). Do not just run off with your own ideas either. There will be strict guidelines on what you can do with any marketing and advertising campaigns. As the brand and your business expands, it is important the company projects a consistent message ‘across the board.’ When done correctly, this will benefit both franchisor and franchisees alike. Everyone must play their part in awareness campaigns. A franchisor, however, should always be receptive to new ideas and ‘updated’ methodology. Yet I would advise all new franchisees to get the basics right first. Following system guidelines is vital for all new business partners at the beginning, because there will certainly be some scope for a franchisee to put their own stamp on matters further down the line.
Working together paves the way for success in franchising
Franchisors and franchisees are not just duty bound, but also contractually obliged, to work together. This applies whether the contract is ‘written in stone’ or merely described as ‘best practice.’ And if this trust breaks down, the franchisee is not only at risk of losing the capital they have invested in the business, but there could be many costly legal implications too – the extent of which cannot be covered in this brief article. The exact rules and regulations are laid out in all franchise agreements, and may differ from company to company. There may also be differences within businesses, depending on the nature of the territory that was purchased. All failures are damaging and it’s important that franchisors protect their brand’s image. Any failure will impact on their growth plans, so it’s vital both sides develop trust going forward. At the end of the day, everyone sleeps a little better if they work in harmony as a team, be honest and help each other.
Happy New Year to you all: I look forward to writing more monthly articles during 2021 in what should be a busy year for the world of franchising. I predict growth in this sector in the UK and it’s a great business to be in when performed correctly.
