Most businesses in the UK have started to
consider the opportunities and benefits franchising offers. Businesses that
have expanded globally or are planning expansion can consider franchising as
one of their potential growth strategies.
The process of turning a small business into a
franchise starts long before the initial advertisements are out for acquiring
potential franchisees. It is important that business owners gain complete
information of franchising and its potential effects on the existing operation
of the business. This information involves financial aspects as well as
personal elements such as unique franchisor-franchisees relationship.
We recommend paying more focus on the personal
elements since there is much more to building a successful franchise than just
having a legal agreement. No matter what type of business you choose, your
business is bound to change once you become a franchise.
Once your small business becomes a franchise,
it will be more focused on recruiting, training, monitoring and motivating
people who wish to run a business under your brand name, using your system and
your business standards.
Your franchisees on the other hand would
expect leadership and direction from you. Hence, as a business owner, you
should look to extend help in the following scenarios:
●
When they want to expand
●
When they face cash flow issues
●
Support with on-going training
and marketing
●
With product and service
development, keep their business at the forefront of its marketplace
You are also expected to create and maintain
business uniformity throughout your network. As promised, you are also expected
to deliver these things to your potential franchisees.
If you think you and your business are ready
for this fundamental change, let's look at the mechanism behind turning a small
business into a franchise.
Five
Star Franchising
There is no guarantee that every small
business planning to turn into a franchise is going to be successful in doing
so. This can happen due to several reasons. But if you want to create a
successful franchise network of your brand, certain key elements need to be
present. These key elements include:
●
Your business should have a
clearly defined brand image and system of operations (both at the branch and at
the head office levels)
●
Your business should have a
proven and successful format appropriate for franchising and with a product and
service that has stood or will potentially stand the test of time.
●
Your business can be easily
duplicated and can be easily learned by your franchisees
●
Your business should earn
enough profits to support both you and your network of franchisees.
●
Your business should be able to
or at least should possess the ability to adapt to a culture of mutual respect
and support.
Moreover, everyone working in such an environment should have a sense of
responsibility on how often and how well they will perform their obligations.
●
Your business should have the
ability to help the franchisees during financial issues. Guiding them towards
suitable cash flow
finance providers
will not only help them sustain the business but also effectively manage their
cash flow in future.
Image
and System
A clearly defined image and system are
collectively termed as intellectual property. It includes your brand name, the
method of operation and the way in which the elements of your business come
together to make up the franchise formula. What matters the most here is the
way you have combined all these elements to create a successful business
system.
The trademark or the brand name is entirely
yours, as you will be licensing others to use it (regardless of whether the
brand name is well known in the market or not).
All the elements of the package are explained
in detail in the franchise manual. These elements include,
●
The design and layout of the
premises
●
The accounting and
administration
Moreover, it is the system which is mentioned
in the manual that a franchisee agrees to operate on.
Proven
Format
With the help of pilot operations you can
prove that your concept works. This evidence of your success is enough to convince
your first franchisee that they should choose your brand as a franchise.
Business owners should be prepared for the
change that follows when a company turns into a franchise and must be able to
run pilot units as soon as possible. The pilot units should mirror the proposed
franchised outlets as far as possible with respect to its size, location,
catchment area, population profile, staffing and more. Moreover, you need to pilot your concept in
two or three places for at least one complete trading cycle.
The main purpose behind the pilot operations
is to see whether the concept you thought of theoretically works well
practically. If the concept works well practically then you can adopt it into
your operations before offering it to franchisees.
Additionally, pilot units also provide you
with an opportunity to write the manual from the practical experiences rather
than just stating the theory.
Easily
Duplicated
If your business requires certain unusual
conditions (for example, constant supply for fresh water), then it will be
difficult to duplicate the sufficient number of support network.
Similarly, if your business needs special
skills which most people do not possess, then your franchisees will not be able
to learn or adapt to your business.
Hence, when franchising, think of it this way:
the easier it is to duplicate and learn your business, the easier it will be to
franchise it.
Profitable
When we talk about profits and fees, we talk
mainly about the structure of the franchise. Do not develop your franchise
structure based on a similar functioning business and decide to charge the same
franchise fees.
No matter what percentage your competitor
business may be charging for their management services and advertising, the
size of the mark-up they charge on supplies will definitely be different from
that of your business.
Once you have sorted out whether your business
is proven, easily duplicated and can be easily learned, you can then look at
the structure of your franchise. This includes the size of the market, how many
franchisees your business will need and the size of your outlet.
Later, as the number of franchisees required
is decided, you need to decide what support staff and structure you are needed
to recruit and support a network of that size. Next, you need to think whether
the business can make enough to satisfy the franchisee and earn you a profit.
Such and many other considerations can be best
discussed with someone that has expertise knowledge in franchising.
It is sensible to
work on the franchisee’s finances at first. Since, if the budget they decide to
work in does not work for them, it will never work for you. If the finances
look good for the franchisee, then move on to work on your finances as a
franchisor.
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