Business mentor: Franchising? Do your homework first

Q: I enjoyed reading your column a few weeks ago on franchising and can see the obvious success of franchising in many areas of business, but how can I gauge whether I can run my business successfully as a franchise and what do I need to do to get started?

* Sarah Trotman, small-business sector specialist, spoke to Win Robinson, managing director of Franchise Consultants (NZ).

A: One of the first questions to ask yourself is: Is my business replicable? Can I deliver the same look to franchisees?

This includes the design, decor, signage, site criteria and plans for construction.

You should be able to tell prospective franchisees how much it will cost to set up the outlet. This also includes not only the fixed costs, but the total expenses from deciding to buy the franchise until the franchisee no longer has to fund working capital out of his or her own pocket.

Is my business built on systems? Systems are an important part of the success of franchising. Systems deliver consistency, from day to day and from location to location.

Is my business able to be taught to other people in a reasonable time frame?

Your product or services must be good. Do they have a uniqueness of their own? Are they competitively priced?

What about the future for your products or services? Will customers want them in the future as well as today? Do I have a strategy to adapt to changing market conditions?

Are my growth plans realistic? Have I done some research into the possible desirability of my business? What type of people do I need to recruit? How can I ensure that they can operate the business successfully?

Is the cost of buying the franchise, setting it up and operating it within the capacity of my targeted type of prospective franchisee? In other words, is it readily affordable?

Do I have the ability to operate a franchise system? I understand that franchising requires certain skills, which may be different from the skills it takes to run my present business.

There are many questions to ask yourself before you decide to franchise or license your business. But the use of a franchise business structure should not be overlooked when you are examining ways to grow and improve your business. It has proven to be extraordinarily successful for many companies in many different types of business.

The two simple keys to successful franchising are:

* Get your franchise format right.

* Recruit the right type of franchisees.

Although these elements are simple, they are not easy. But it is definitely worth persevering with.

It is vital that a proper situation analysis is carried out, then the all-important feasibility study, to define the optimum franchise format or structure, and then a comprehensive implementation plan to enable you to roll out the franchise programme in an orderly and advantageous way.

Your systems will need to be written up in a set of comprehensive manuals covering the operation of all aspects of the business.

Getting the franchise format right is a highly skilled job that should be done by a specialist with plenty of experience in the different forms of franchising.

Once these two key steps are completed, you can then go to a specialist franchise lawyer and have the agreement written up.

The last step in the four-step process is to produce your franchise recruitment documents.

You will have profiled the ideal type of person you want as your franchisee in the implementation plan and you will also have mapped out a recruitment campaign.

The recruitment documentation is the all-important culmination of your recruitment plans. The purpose of the recruitment process is to get the right type of franchisee and to limit your legal liability either now or in the future.

If you want to know more about franchising your business phone 09- 523-3858.