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Think, before you franchise

These are some of the things that you should think about before you take the franchising route. If you have any questions about franchising your business then please give us a call and one of our consultants will be happy to talk to you.

Can your business be franchised?

Check that your business is, in fact, franchise-able. It must be capable of generating sufficient margins for it to be profitable for both parties - you and your franchisees. There must be checks in the system that enable you to monitor the sales achieved by your franchisees, otherwise there is a risk they will under-declare and you will lose fee income as it will be based on their turnover.

Can the know-how to operate the business be transferred to franchisees reasonably easily? ie. It is easy to see how you could put the processes of the fast-food industry into a document to ensure every new franchise does the same thing that you did.

Does the business rely on the operator having personal attributes that are rare? If it does then you may struggle to get franchisees on board that will make your franchise a success.

Is franchising the right way to expand?

There are other options you could look at such as licensing so it's worth a conversation with a franchise consultant to find out. Before any franchise can be rolled out a pilot franchise must be set up from scratch to prove that the systems you have in place are viable and can be replicated by other people.

This pilot franchise will be a great testing ground for your potential franchise and any problems can be ironed out at this stage. People taking on a pilot franchise are made aware that they are the first and with that in mind they generally pay less than future franchisees or have a slightly different plan.

Can you afford it?

You must be adequately funded to establish the franchise. Setting up a franchise costs money and is not a cheap option although the rewards can be huge.

Accordingly, you should seek professional advice from an accredited franchise consultant on what these costs are likely to be before embarking on the franchise route. After the first free consultation we will provide an itemised estimate based on what you want to achieve and how much help you will need.

Set out the role of the franchisee

Identify and specify the role, duties and responsibilities of the franchisees. For franchisees to be successful, they must understand precisely their role, duties and responsibilities. These should be spelt out at the first interview and the applicants should agree they are happy with them.

Protect your brand

It is your brand that people will be buying into when they join you as a franchisee and it is your differentiator between the competition in your marketplace. Your brand should be consistent and most importantly protected.

You should ensure that all elements of your brand are protected and trademarked. If you haven't already done so then you should invest in a brand manual which sets out exactly what the franchisees can and can't do in the name of your brand.

This is vitally important. A key element of the relationship is that the franchisee trades under your name and requires the protection that no-one has the right to use that name other than you and your franchisees.

You need a good franchise prospectus

The prospectus that you send potential franchisees is the key to keeping them interested when they are probably looking at many franchises and their relevant prospectuses.

If you have the budget consider a professional company like prospectus pro to help you produce your prospectus. They will have created many prospectuses and can help with writing the content and then reproducing it in an appealing way to give you the credibility over someone who has simply converted a word document into a pdf.

Be careful not to over promise and therefore under deliver

Be very careful what you say in all dealings with potential franchisees as in the early stages they will be eager to hear of the success that they are buying into. However should the success not be quite so forthcoming then everything you have said and promised will come under intense scrutiny.

Be confident that the financials are achievable

Evaluate first what a franchisee can realistically earn and then evaluate your own income and expenditure. Franchising differs from conventional business planning in that the franchisor builds its business on how its franchisees perform. Accordingly, it is a prime requirement to look at the franchisees earnings first and ensure they are realistic and attractive.

Don't write the franchise contract yourself

This is the single biggest safeguard that you have for your business going forward as once you have franchisees then they will start to take ownership of at least part of your brand and without a solid contract in place then you may be powerless to stop them doing something which you think is going to harm your brand. Or even worse you might be left with a destructive franchisee who you cannot remove because they are not actually breaking the terms of the contract. A solid franchise contract written by a specialist solicitor might cost several thousand pounds but it is the bedrock of your business and so you shouldn't look to save money in this area.

Make sure you can support the franchisees properly

Be equipped to provide your franchisees with training and comprehensive operating manuals. Franchisees are joining you to acquire not only the right to trade under your name, but also to use your intellectual property, know-how and systems. These are transferred to the franchisees through initial and ongoing training, operating manuals and web-based computer systems.