Member Article

Franchising your business: the steps

Last time out I looked at the broad elements to determine if your business is franchisable. Now let’s take a look at some of the processes involved in going from a single company-owned unit to a multinational franchise empire; there’s a lot more to do than you might think…

There are several steps that potential franchisors should take:

• Seek expert advice from the British Franchise Association (bfa), who can also provide introductions to expert accredited consultants, solicitors and accountants, experienced in franchising, who meet ethical franchising standards and can help you identify whether or not your business is suitable to franchise, and guide you through the necessary procedures
• Research the market to ensure that products and services are competitive and distinctive enough to be franchised, and that customer demand is sufficiently widespread to profitably support a network
• Produce a business plan outlining proposals in full and including a detailed SWOT analysis
• Protect all intellectual property rights by registering trademarks, trade names and patents with the relevant trademark and patent offices
• Test the franchise in the form of a pilot operation lasting at least 12 months, ideally longer if the business is in any way seasonal. The pilot scheme should be undertaken at more than one location in order to test the concept in different geographical areas. A comprehensive pilot operation will prove the viability of strategy and approach, highlight problem areas, and enable the franchisor to fine-tune the package before fully committing to developing a network
• With the pilot operation running successfully, the franchisor can prepare and launch their network. At this stage the franchisor should instruct a solicitor familiar with franchising operations to draw up a comprehensive franchise agreement setting out the obligations of each party – including how the fees, mark-ups on supplies and any other payments from the franchisee are to be calculated. These obligations should be made clear at the outset of any contract with a franchisee, to prevent possible conflicts in the future
• Determine suitable territories in which your first franchisee(s) will operate – most franchises offer exclusivity within a set geographical boundary
• Produce a prospectus to attract suitable franchisees and to determine the criteria for franchisee selection
• Produce a comprehensive operations manual and training programme for franchisees – this will enable the franchisor to set and maintain standards of service throughout the network
• Establish a central management function and, possibly, field support staff to support the franchise network; and set up a system to monitor the performance of franchisees
• Develop a marketing, sales and advertising strategy to promote the franchise network, especially when competing with rival companies of whose services potential customers are fully aware

The franchisor will need to commit substantial amounts of time and money before their income stream begins – for market research; pilot schemes; promotional material explaining the benefits of the franchise to potential franchisees; selection and training of franchisees; production of an operations manual; formation of a central management team; initial stock and equipment; as well as for the launch of the franchise network and associated advertising.

Once the network is up and running, the franchisor and the central management team need to constantly monitor the performance of the outlets. This helps to ensure that quality levels are maintained and to identify and assist any franchisees who are in difficulties. A franchisor’s ongoing commitment, through training, product development and other support, is vital to the success of the franchise network.

For more information on any aspect of franchising, visit the bfa’s website, www.thebfa.org.

This was posted in Bdaily's Members' News section by Paul Stafford .