Franchising can be a smart way to grow your business. Getting other companies, or franchisees, to pay to use your business concept means they will expand your brand’s reach and you will quickly become more established. They manage and finance their businesses so you can focus on your own operations, and you’ll receive a royalty based on the franchisee’s turnover. Here’s what’s involved:
1. Check your business is franchise-friendly
Before you go down the franchise route, consider this checklist:
- Are you making enough money to merit expansion?
- Do you offer a product or service that has a long-term market?
- Are the margins sufficient to offer both you and your franchisee a return on investment?
- Can new employees quickly and easily pick up the skills necessary to do the job?
- Can your business be easily replicated in different locations, in terms of customers and logistics?
2. Get the geography right
Once you’ve decided that franchising could suit your business, you need to develop a structured territory strategy. This means researching the best regions and locations for future franchises of your business. If you run a sandwich shop, for example, you might want a mix of high street and shopping mall franchises. This should be done right at the beginning of the process.
3. Develop a clear prospectus
In order to sell your concept to potential franchisees, you need a realistic and compelling prospectus to get them interested. It should include a detailed explanation of your product and service, the desired franchise territories, franchise start-up/set-up fees, confirmation of how you will support the set-up, and projected financial returns.
4. Consider costs
The initial fee you charge will help fund development and marketing of the franchise opportunity, but don’t pitch it too high; new franchisees might be put off by a figure that exceeds a few thousand pounds. Bear in mind that you’re responsible for helping them set up their franchise initially, so you need sufficient financial capital to help invest in property, kit and staff. You’ll also receive a royalty based on the franchisee’s turnover, so it’s in your best interests that they’re successful. A low initial fee could help build your network quickly and reward you in the long term, but you’ll need a contingency plan in place to cover any shortfalls in the short term.
5. Market the franchise opportunity
Make people aware that you’re looking for business partners by publicising the news. This could be through a direct mail campaign or by attending or hosting a stand at relevant trade exhibitions in order to do some networking.
6. Find the right people
If your franchisees do a bad job, your brand will suffer. It’s essential that you enlist candidates with sound business experience and those you trust to uphold your brand’s reputation. Detailed interviews and good references can help you gauge their suitability.
7. Put an operations manual together
Write a comprehensive operations manual for a franchisee to refer to. It’ll provide administrative support, showing how you run your business and recommending how to set up and manage a new outlet. Also, let them know what training you propose to fund and any marketing initiatives you plan to finance.
8. Take professional advice
If you’re new to franchising, make sure you research and prepare thoroughly. Consult industry bodies like the British Franchise Association (BFA), (opens in a new window) which is a governing body for franchising. And be sure you have a good accountant and legal adviser to call upon.