Can You Start to Franchise Your Business?
Updated on 11/03/2019
Put simply, yes, you can. If you own a business with a great concept that’s already profitable and you fancy a go at expansion, franchising could be the best option, considering that franchising provides scope to expand your brand more quickly and with less capital outlay than growing organically. However, in order to franchise your business, a substantial investment is involved. Franchising requires a huge time commitment and a sheer determination to succeed, as well as the ability to establish a business model conducive to future growth.
If you are completely sure that franchising is the best decision for you, there are some important steps to ensure that your business is fit for franchising and, crucially, that it is a fruitful business move.
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Step 1: Consider whether your business is 'franchiseable'
In theory, any business can be turned into a franchise. However, in order for it to be a success, there are some basic standards that must be adhered to. The business needs to be credible, unique and teachable, and provide an adequate return.
Credible – A good way to establish whether your business concept works is to observe at least one viable example of how you have been consistently profitable over a significant time period.
Unique – Franchisees are investors; therefore, it is fundamental that they can see the unique value a concept has to offer. Therefore, it must stand out from the competition whilst proving that it will thrive in the market. There should be a differentiating factor to prompt investments from franchisees.
Teachable – Whilst the business idea must be unique, it also needs to be easily replicable for it to be considered a feasible franchise opportunity. If you can’t train franchisees to operate their business according to your business model, there is no chance of it succeeding.
Adequate return – For your franchise to triumph, franchisees must be able to run profitable businesses. They also need to generate an adequate return after royalty and marketing fees are paid, otherwise it will be difficult to acquire and retain motivated and ambitious franchisees.
If your business meets the British Franchise Association (BFA) criteria, then franchising offers a great opportunity to grow your business.
Step 2: Develop a business strategy
Set goals for your business regarding how you’d like it to grow through franchising – this could be on a national level or even on an international level. Also, think about how many staff members or outlets you would like. Your plan is crucial in determining the direction of your business. For you to build a robust franchise, personal and business goals should be set as a fundamental part of your strategic plan.
Step 3: Test the franchise
In the UK, the British Franchise Association states that a business model needs a clear and proven method of trading for it to be considered a “Business Format Franchise”. Any potential franchisor must put its model to the test for at least a year, evaluating each activity, result and challenge to ensure that it can be a success.
Step 4: Appoint a solicitor
While the business concept is being tested, prospective franchisors can start to get their franchise underway. If a solicitor hasn’t already been appointed, now is a great time to consult a BFA-affiliated legal advisor that specialises in franchising to develop a franchise contract. The franchise agreement will cover fees, territory, training and support as well as the length of the contract and any exit restrictions.
This stage is central to the smooth running of a franchise, as the franchise agreement forms the basis of the roles, responsibilities and obligations of the franchisor, franchisees and any other parties involved.
Step 5: Recruit franchisees
The recruitment process starts when a potential franchisee expresses interest in your business and continues until all the training is completed. As a franchisor, you’ll want to demonstrate how you run your business from the get-go, so having an efficient, organised selection process ensures that applicants will have a great first impression of you.
Step 6: Market the franchise
Now that you’ve created your new franchise business, tested the concept, developed a franchise agreement and selected your franchisees, it’s time to promote it and get everyone talking about it. Having a great marketing and advertising plan, along with an ample budget, means that you can start to form a customer base and build brand awareness.
Of course, the process of franchising your business can be lengthy and sometimes challenging, but there are advantages too:
It’s cost-effective – Not only do your franchisees pay to purchase their own franchise outlets, but you’ll also receive franchise fees and regular royalty payments. This means that you don’t have to think about funding new premises or staff to grow your business and the more your franchisees succeed, the more you’ll benefit.
Working with motivated talent – As franchisees are effectively running their own businesses, they’re much more likely to be motivated and work hard to ensure that the business is profitable. Franchising is an excellent way to find gifted and enthusiastic people to run your franchises in different locations. They will be rewarded for their hard work by receiving a percentage of the profit made and you’ll have a successful outlet increasing brand awareness for your business.
It’s a low-risk form of expansion – The traditional way of expanding an independent business would be to choose, finance and run outlets in different locations yourself. This would not only be a significant financial risk to your business, but also a risk to your personal wellbeing. In contrast, franchising is often less risky and results in impressive returns. For a comparatively small amount of investment into each location, you can receive generous royalties from sales at those outlets.
So, a business definitely can be franchised effectively if it’s proven and successful; able to be replicated and easily taught; and likely to be lucrative for both franchisors and franchisees. And now is a great time to enter the franchising industry in the UK as there is an abundance of professional guidance available to potential franchisors. Done right, franchising is a fantastic way of growing your business in which everybody wins – you, your franchisees and your customers.
Becky Martin, Point Franchise ©
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