So, you have a great brand and successful business, and now want to expand? Setting up additional branches can require a significant cash investment and drain your available management time. The right locations need to be found, premises and services established, and good people recruited and trained, and you will need to adopt a very different management structure to the one which you are comfortable with today. Franchising can marry the best of what you (as franchisor) has to offer with the local knowledge and dedication of motivated entrepreneurs who see value and opportunity in your franchise model.
I have worked both as franchisee and a franchisor, and a friend recently asked me what advice I could offer a small business considering franchising as a route to fast-track business growth. Using my Life is a Sine Curve methodology, here are my Five Fundamentals to successfully Franchising Your Business.
Take stock and make a plan
Life is a Sine Curve starts with a plan and then asks you to understand where you are now in your journey towards delivering its objectives – personally and professionally. It may seem counter-intuitive to look at where you want to be before considering where you are today. Where you currently are will look and feel very different, depending on where you want to go, what you want to achieve, and how you feel about delivering your plan.
Once you have your plan and established some clear goals, you will be more self-confident and therefore more open, critical and honest in assessing where you currently are professionally. Weigh up:
- Whether you have enough operational margin to share across a franchised network
- Your management style and personal growth opportunities
- What makes you and your business unique
- What you need to drive, and what can be driven by other people (i.e. your potential franchisees)
By thinking these through, you’ll be effectively establishing the responsibilities and expectations of franchisee and franchisor (you).
Define your targets
Get a map and do some market research! Work through:
- What’s the size of the existing opportunity for your offering?
- What’s the future likely to look like? Will the market grow? What are likely new innovations?
- What does the competition look like?
- Where and who are your potential customers?
- Where should your new locations be? Are we talking UK, EU or further afield?
It’s important to consider all of this from the get-go so you can get the right legal and commercial framework established from the outset.
Think about who your customers are today and what they think of you. What would your customers like to see improved or done differently? Being close to your customers and having a clear understanding of their needs and the role of your business in fulfilling these needs should be important to any business. However, to get the most out of your franchise model, this is critical. Running a simple customer survey could pay dividends – so give it some depth and dedicate a chunk of your management time to engage with the feedback, make improvements, and thank your customers for their valued opinions. Don’t forget to include this action each year in your ongoing marketing / sales plan.
Understand your new role as franchisor
Ask yourself the following questions:
- What are you selling to your franchisee? What value do you bring and what is your income model? Critically examine your value chain and establish the value your product brings to the customer, the financial value and return on investment for the franchisee, and your own profitability. Is the model sustainable and what does your cash-flow look like?
- What are your expectations of the new franchisee? Do they have the required experience to run and grow a business, to represent you and your brand, sufficient cash to allow for the inevitable downturns, and does their business plan make sense and align with your goals? What do you expect from them at the start? Is there a start-up income opportunity for you? What will the franchisee get in return? How will you manage and support your franchisee? What are the growth and performance expectations?
Clearly defining these roles and responsibilities is critical to a successful franchisor / franchisee relationship and should be clearly outlined in your Franchise Manual. The Franchise Manual should be the go-to ‘how-to’ reference guide for all processes within your business with specific SOPs included in the Appendix. The Franchise Manual should form the back bone of your initial training for new franchisees and be their reference guide to check before the franchise owner or one of their management team calls you with questions.
Do take time to consider H&S considerations for you and your franchisee and discuss these with your franchise lawyer. You will have H&S procedures for your current business and will need to adapt these for your franchise partners so you have consistent safety management systems in all aspects of the business deliverables.
Focus on training and development
The success of your franchise partners will depend on you providing comprehensive training and support at the outset, followed by ongoing mentoring to ensure they achieve your growth plans for the business. The more you can document this beforehand the more efficient you will be later on as your business grows. Consider the use of online training modules to make the best use of your available time, but do not underestimate the value of face time. Build in regular reviews and assess your people and the progress of the business.
Potential franchise partners will be assessing your ability to deliver a successful franchise business for them. If you can demonstrate upfront your businesses training modules and development plan for their future team members, they will be more open to investing in your franchise model.
Get the right advice
Once you have worked through the first four fundamentals, you should look for professional advice. It might sound counterintuitive to leave this until step five, but it is logical. Working through the first four points requires focus. The better the quality of your thinking now, the better your chance of finding top quality people to become your franchisees. Secondly, your franchise lawyer will have a more straight-forward job of understanding what needs to be included in your Franchise Contract and Franchise Manual when the objectives, goals and responsibilities have been clearly considered and articulated beforehand.
Jane Masih of Owen White Solicitors, and a British Franchise Association Affiliate, says: ‘proper thought and planning upfront supported with sound legal advice to construct a good franchise agreement will offer the best possible opportunity of success for the franchisee and franchisor, limit potential disputes, and will provide a resolution framework when disputes do occur’.