Is franchising the way forward for your business?
Before you rush in and decide to open a franchise, you need to understand what youre getting yourself into.
A franchise is a business model where one party (the franchisor) allows another party (the franchisee) the rights to operate under its established brand and business operating system.
Under this model, the franchisee can use the brand name, logo and operational structure of the franchisor. However, to be allowed to do this, the franchisee typically needs to pay an initial fee and ongoing royalties to the franchisor.
If you have an established business, franchising can be a great way to help maximise business return and help it grow at the same time. But do you know what is involved?
Why should I franchise my business?
Franchising isn't for all businesses, and there are a few points you should consider first.
That's not to say that franchising doesn't work; you probably use franchised businesses without realising, such as McDonald's, Domino's Pizza, Cash Converters and numerous others. It's seen as a good way to expand your business' name and its market potential. However, you should consider the following points:
- Does your business have a replicable model, such as having policies and processes that can be used by others as successfully as you?
- Are your margins on products enough to generate income not only for the business to survive (including paying franchise fees), but to provide franchisees enough money to live off?
- Do you have the required skills to pick suitable franchisees to run new outlets?
- Does your business already have a known name and reputation, or is it able to develop both?
- Is the market big enough to cope with multiple branches of your business without disadvantaging each other, and is there a demand for your products and/or services?
- Can you support the franchisees and offer them the services they need?
It can be hard work and can require a large investment. For example, you will need to create a franchising manual, conduct market research and calculate financial projections for each territory. This is on top of having to offer support services to franchisees (which could include IT, marketing, stock management and premises).
What is normally offered with a franchise?
This does vary from business to business, but generally, it can include premises (although some businesses require the franchisee to source premises first), equipment leasing, loans, training and general support.
What's involved with running a franchised business?
You will need to recruit franchisees. This can be from applications received, like a recruitment process. It may be a good idea to seek professional help in this area, as you need to ensure they are perfect for your business.
You also have to ensure they are happy with your support and keep them up to date on any changes within the business too, such as new products and services. Remember - the franchisee is there to make a profit.
Any advice?
Research, research and research. Put the time into researching what franchising could do for your business, and see what competitors are doing. If you do proceed, ensure you have an appealing brand with a good marketing campaign and good products. If it's done successfully, the returns can be rewarding.
Further Reading
- 16 Dec 2024 - I want to start a business but don't know where to begin
- 09 Dec 2024 - Is franchising the way forward for your business?
- 27 Nov 2024 - VAT - What is it and how do I register?
- 21 Nov 2024 - Outsourcing: Pros & Cons
- 24 Oct 2024 - Why do Businesses Fail?