KEY POINTS:
Is franchising a good approach to expanding a business? What can make a franchise stand out?
Franchising may be an excellent growth strategy and it doesn't suit everyone, or every business. A huge amount of work goes into establishing a solid franchise business and it means a considerable change in focus and role. Do your groundwork, take advice and be sure you understand what you are taking on. It's vital to establish significant and genuine points of difference for the franchise itself, and products or services you offer. Decide on the culture of your organisation and whether your brand reflects this.
What are key factors to consider before launching a franchise?
Are there financial or legal issues? Establish, document, test and refine systems so they are bullet proof when you begin selling the franchise. Ensure there is a market and demand. You need to be convinced you are offering a franchise with real value, so you have the strength of convictions as you go to market. A potential franchisor will need time and money to: develop, document and refine systems; develop marketing to support and sell the franchise; establish the franchise agreement and disclosure documents; and train and support new franchisees.
What is the best approach to working with franchisees?
Ensure you create a win-win relationship with your franchisees. Give more in "use" value than you take in cash value. Structure licence fees and royalties to be a reasonable return for the support, training and business structures provided to franchisees, while giving them the ability to yield a generous return on their capital.
Is it necessary to bring in expert advice during the process?
Use the services of a qualified and experienced franchise consultant, business coach and/or lawyer. Get the best advice from the start - a sound investment that could save you a fortune in the long run.
Is financial disclosure required between franchisor and franchisee?
Expect full disclosure from your franchisee - and offer the same to them. Share your cashflow figures, successes and failures. Don't inflate projections for the franchise. Be willing to disclose information and build a relationship based on honesty and trust.
When taking on a franchisee, what should be considered?
Don't accept anybody purely because they can afford it, even if they are competent - not everybody will fit with your brand and culture. Are there any pitfalls to avoid, especially during the initial stages?
Don't aim to grow too big too fast. Manage teething problems, refine the systems and processes, and grow the franchise network in managed stages.
