Member Article

Why franchise your business?

Some of the world’s biggest brands have chosen the franchise model as their means of expansion. Some of the UK high street’s biggest names use the model with great success, and still more when expanding overseas. O2 for example announced that by the end of this year they will have converted almost half their corporate outlets in the UK to franchises. Debenhams have experienced huge growth abroad via franchising.

Franchising can strengthen the brand and reach of a company in a very cost-effective manner when it’s done properly. Essentially, it’s the granting of a licence by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade as their own business under the brand and systems of the franchisor, following a proven business model. The franchisee also receives a package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis.

Franchising today encompasses a multitude of business types and consumer markets and has well established itself as a respected and highly regarded business model. So what are the advantages of using a franchise model for growth as opposed to expanding organically?

More cost-effective growth: Your brand benefits from the capital investment and resources of others (your franchisees) so you require less capital than taking on more stores and more staff yourself. Fees are paid by franchisees to join the network (covering the cost of training them and establishing them in your systems) and then on an ongoing, monthly basis.

Quicker growth: Once you have the right systems in place, franchises can expand at a quick rate. If you put the work and investment into getting your model right at the beginning, then the only limitations on your expansion rate are the ability to recruit, train and fully support your franchisees.

Better results per outlet: A network of owner-operators gives you a more robust business compared to simply installing managers. Franchisees are far more motivated and have a significant vested interest (financial, time and emotional) in the success of their business, and consequently your brand, which grows through a network of ambassadors with as much interest in you as making it the best it can be.

Some of the biggest UK high street names frequently report a 30% upturn in store revenue when a company-owned outlet is converted to a franchised one.

Economies of scale: A franchise network can begin to take advantage of bulk buying power, reducing your production costs for example and/or increasing your profit margins.

Easier management: A franchise network requires staff to support and oversee it, but far, far less than a similarly-sized company-owned operation would require to function. Franchisees take on all the responsibilities for individual outlet staff, accounts etc.

The first thing to understand is that franchising is not a tool to fix a bad business; it is not there to provide injections of income from other people to underpin a failing elsewhere. Franchising is a model used to replicate a successful and proven business, using the investment and skills of new individual business owners, who will be trained and supported to run the business under the agreement, conditions and format, as proven and agreed between both parties.

Get it right and you could have the next UK-wide success story…or a global empire!

For more information on franchising your business and the professionals who can offer you the right advice, see the bfa’s website www.thebfa.org.

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