Understanding the Foundation of Franchising

13/04/2018 18:00 | Start a business

the foundation of franchising

Be your own boss or work for someone else? But what about becoming a franchisee? Increasingly, franchising is being recognised as a business model that combines the best of both worlds. You can effectively work for someone else while working for yourself.

And the franchise business model can be applied to almost any sector. In the UK over 900 established franchise brands are operating more than 44,200 franchisee-owned businesses. So, if youre considering making a franchise investment, here are the four elements that form the foundation of franchising.

The system

The term franchise system describes the whole franchise offering. Its the franchise business model, the branding, the culture, and the operational procedures all rolled into one. Without a well-defined system, the consistency of the business is jeopardised. This also affects the franchises ability to be replicated by franchisees. When youre reviewing franchise opportunities you should be satisfied that the system is proven.

A proven franchise concept is very appealing to budding entrepreneurs. By investing in a franchise system that works youre able to avoid many of the challenges that independent business owners may face. The franchisor will have ironed out the creases and developed a robust business model.

A great way to determine if the system is as effective as the franchisor claims is to ask existing franchisees in the network. This valuable source will allow you to hear first-hand what its really like to be part of the franchise. Franchisors should encourage you to speak with their existing franchisees, and if they try to stop you, or attempt to cherry pick which franchisees you meet with; there may be flaws in the system that theyre trying to hide.

The brand

At the heart of a franchise system is the brand. A brand is what differentiates one business from another. It can be a name, a logo, a tagline, or any other feature that identifies the goods or services of one business as distinct from those of another. When you make a franchise investment, a large part of what youll be paying for is the brand, including the franchisors intellectual property. This is generally made up of the brand name, the copyright, the operations manual, and the confidential elements of what makes the franchise work.

But remember that a brand is more than just a name or logo. Its a holistic concept which represents the recognisable public face of the franchise. It almost acts as a guarantee that the customer will receive consistent, uniform, familiar experiences across all franchise outlets. And its this standardisation which customers value and trust.

So, knowing that the brand is such an important element of franchising, you must ensure that you give it the attention it deserves during your due diligence. Ensure that the franchisor has adequate protection in place for the brand. Confirm that the relevant registered trademarks are in place and identify how they deal with misuse of the brand. After all, the brand is what youre paying for so be satisfied with what youre getting.

The franchisor

The relationship that you develop with the franchisor is key to your success and longevity as a franchisee. Of course, a connection is needed to be established with the franchisor, but first and foremost, the role of the franchisor is to protect the system and the brand so that all franchisees can thrive. This means that it may feel that the franchisor is a disciplinarian at the beginning of your relationship, but its important that they clearly communicate the rules and their intention to enforce them from the start.

However, a good franchisor will also understand that as a franchisee youre a business partner, not an employee, and so treat you as such. They should listen to your opinions and ideas and communicate openly and honestly. Again, speaking to existing franchisees in the network will give you more information about the franchisors leadership style and the level of support that they offer.

The franchisor will very often be the driving force behind the culture of a franchise. When youre attending a discovery day or completing your due diligence, you will get a sense of what this culture is. Its difficult to analyse whether you feel like youll be a fit for the culture, its more a gut feeling that youll get. Trust your instinct on this occasion. If youre going to be a successful franchisee you need to respect the franchisor and their culture.

Franchising is a team effort. For the franchisor to succeed, you and the other franchisees must operate profitable franchise units. Therefore, a brand's success depends on an ongoing partnership between franchisor and franchisee. Your relationship is a legal one outlined in the franchise agreement, but for a robust, productive and satisfying relationship, it has to be so much more than this.

The investment

So, there's no denying that the system, brand and the franchisor are all pretty fundamental to the foundation of franchising. But, equally as necessary is the franchise investment. Franchisors that have developed a successful franchise business model have done so to expand their business empire and to make money. Similarly, youll want to buy a franchise so that you can also make a profit.

The beauty of franchising is that it can be financially beneficial to both franchisor and franchisee. But to ensure that the fees you pay to the franchisor are fair, you must first research the franchise opportunity diligently and seek professional legal and business advice before you sign on the dotted line.

Buying a franchise is no guarantee of success, but by working hard and adhering to the systems and processes, youre mitigating many of the risks associated with being your own boss. So, consider what the franchise fee is buying you and how that investment will be put to use in helping you get started in the business. Once youre happy that the numbers add up, franchising can open doors to your future success.

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