A business ‘partnership’ in which one party permits the other ‘partners’ to replicate a proven business system, operating under a common brand, in return for initial and on-going fees. It allows a third party to legally copy your business in exchange for an upfront payment and on-going management services fees.
Is Franchising suitable for your Business
By Daniel Kidd
A business ‘partnership’ in which one party permits the other ‘partners’ to replicate a proven business system, operating under a common brand, in return for initial and on-going fees.
It allows a third party to legally copy your business in exchange for an upfront payment and on-going management services fees.
To franchise a business you need the following factors
• Sufficient development capital to establish a franchise system
• High enough margins to share
• Existing business network or ‘pilots’
• Easily transferable knowledge
• Identifiable brand or trademark
• Expansion requires investment into property, equipment and staff
• Franchise fees will generate a stream of capital income and ongoing revenue
• A loss of profit margin will be offset by much larger overall revenues
• Motivated franchisees ‘running their own businesses’ will generate higher per unit income than employees
What can be franchised?
• Very diverse range of businesses
• Proven business systems capable of replication
• Profitable businesses financially viable for both parties and financially secure
• Steady or growing demand for your products or services
• Simple business formats that are easy to learn
• Identifiable brands and trademarks with your own distinctive image or concept
Undertake a SWOT Analysis of your brand
• How long have you been in business?
• What is proven?
• Are these above average industry benchmark?
• Is there enough margin for two?
• How big is your market?
• How volatile is your market?
• Does it have mass appeal?
• Is there consumer acceptance of your product?
• Is your product or service easy to sell and deliver?
• Quality record?
• Is your Intellectual Property protected?
• Is there a unique and distinguishable marketing approach?
• What is your reputation in the market place
• Do you have the management skills and capacity to create a new culture?
• Is your business professional and well presented?
• Is your management financially skilled?
• Do you have well documented processes and systems in use?
• How is Information Technology used in your business?
• What is your attitude to risk?
• Is there a commitment to research and development?
• Do you have sufficient access to development capital to fund growth?
• Are there similar franchises already on the market?
• Will the franchisee be able to control their costs?
• What will be the minimum term?
Reasons for failure
• Growing too fast too soon
• Franchising for the wrong reasons
• Lack of planning
• Selecting the wrong franchisees
• Lack of infrastructure and support
• Failure to take proper advice
Review your SWOT
Do you have the key criteria you need to franchise
• Developed systems of operation and staffing
• Defined image and clear market position
• Proven and successful business model
• Sustainable market and source of ongoing clients
• Easily duplicated management systems
• Profitability for both parties
• Mutual respect and support – partnership
• Will your operating experience and culture allow you to develop a franchise operation?
• Are your products or services suitable for franchising?
• Is your Brand sufficiently well developed and strong enough to deliver a worthwhile advantage to a franchisee?
• Is your financial position strong enough to support a franchise network?
• Is your business system provenFind Article, robust and capable of being learned by a franchisee?
ABOUT THE AUTHOR
Daniel Kidd writes about a range for business and franchising topics. For more information please visit Coach Franchise.
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