Is My Business Franchisable?Posted on: Tuesday, 27 August 2019 1:16 pm
Franchising can be a great form of expansion for many businesses and can lead to huge growth for your brand.
Franchises are usually less risky than many other forms of company-owned expansion, and lead to higher, more consistent profits for both individual franchises and the network as a whole. Over 600,000 people in the UK are employed within a franchise network, and over 90% of franchise units are profitable, while only 3% fail.
As a massive (and still growing!) industry, you may want to look into franchising as an option for growing your business more cheaply and quickly than company-owned expansion, but there are still many things to consider. Franchising requires the commitment of resources - both management time and financially, to the business and to your franchisees, so shouldn’t be undertaken as a ’quick fix’ for a failing business or as an ‘easy’ alternative to company-owned expansion. How if your business is franchisable you can reduce the financial commitment and keep the time resource at a minimal level by working with specialists in the area that can do a lot of the work required for you – that’s what we do at The Franchise Company with our clients.
Before looking seriously into franchising your business, there are a variety of different things you should consider regarding your business model, industry, finances and operations. In this article, we’ll explain the things that you should take into consideration when looking into moving your business into a franchise model.
Is My Business Franchisable?
Is The Business Proven?
Firstly, some new businesses aren’t appropriate for a franchise model. The business should be well established and have proven its success for at least one year and ideally more before looking into franchising. This means that businesses capitalising on the latest fads, fashions or crazes aren’t generally suitable to franchise as the bubble will soon burst, and ideally you should aim to have at least 2-3 years of trading under your belt.
This isn’t a hard and fast rule, but most newer businesses haven’t got the established operations, practical competencies, brand identity and visibility, and financial stability to begin a successful franchise model.
The best and most franchisable businesses are those that are well established, successful in their current location, have good brand awareness and the capital required to start a franchise model.
Can You Replicate The Business?
It might sound obvious, but it’s something many businesses overlook when initially looking onto franchising - how replicable is your business model?
You could have the most profitable business model, with a group of committed franchisees, capital to start a franchise network and marketing plans in place, but if your model can’t be easily replicated by your franchisees, then it will all be for nothing.
If your business model requires very specific knowledge or niche skills to operate successfully, franchising might not be the right route of expansion for you. As a rule of thumb, the best franchises should be models where the core skills are able to be learned in the space of a few weeks, so overly technical, highly skilled models aren’t generally appropriate for franchising unless the franchisee already has the skills required (as is the case with professional services such as accountancy, dentistry, veterinary and ophthalmic sectors).
Businesses that are the most franchisable are those with a simple, easy to follow model that can be replicated by almost anyone. Anything too complex will make the process of expansion slow, difficult and costly to the franchisor.
Is your Marketing successful?
You need to know how your business should be marketed before looking into franchising – franchisees will expect you to advise them in how to grow and expand the business and bring in new customers.
Marketing efforts should focus on building a strong and highly identifiable brand that can be recognized in its service sector and as a successful franchise over time. The collateral and messages should be striking and easy to understand, and the core of the brand identity is something that should resonate across franchises, areas and territories.
You should be able to instill brand loyalty among customers, but especially among potential franchisees. Franchisees should be able to see the benefit of working under your brand’s umbrella, as well as having genuine passion for working with your company. After all, they are the ones who are going to invest thousands of pounds into your organisation.
Highly marketable companies with strong branding and an engaging mission are the best companies for franchising, as brand replicability and engagement are vital for both customers and potential franchisees when moving into a franchise model.
As part of your business protection your should look to register the brand name and any logos used as registered trademarks with the Patent Office.
Is There Value For Both Parties?
Franchising is a brilliant way for business owners to expand their brand reach and profits. It is generally less risky than company-owned expansion and has great potential for continued success.
However, the system also has to have benefits for franchisees to ensure the model is successful. Franchisee recruitment is a huge part of the franchising process, and your franchise offer has to be attractive to enable you to recruit high-quality, dedicated and motivated franchisees. The ability to generate good profits from the business and the potential to sell the business for an increased capital value in comparison to the original investment will help you to attract high-quality individuals to your franchise network.
If you aren’t able to offer real commercial value and advantages to your franchisees, then your business might not be well suited to franchising.
Do You Have The Capital?
Franchising may be cheaper than company-owned expansion in the long run, but it does still require some capital investment to develop the model and systems and engage in the initial stages of franchisee recruitment. Most companies fund these costs from the profits created from the core business or take a commercial loan.
About The Franchise Company
The Franchise Company are expert franchise consultants that can help advise you and your business on the best move as you grow. As one of the longest established franchise consultancies in the country, we have the skills and expertise needed to ensure you make all the right moves into becoming a fully, successfully franchised business. Our fees for the initial development work are normally paid on a staged basis linked to the expected timeframe of the development work. To find out more about our services or to speak to one of our consultants about whether franchising is the right move for you, contact us today.