Many small business owners have discovered the benefits of franchising their company. But it isn't so easy as signing a few forms - even fairly established franchises can fail seemingly without warning.

With the right concept, franchising can be an effective expansion strategy, requiring much less capital investment than trying to expand the business through setting up units. The process will be long, and involve a significant cost, but can have great reward for both the franchisees and franchisors.

Will It Work?

Before anything else, you'll need to consider whether your business is actually going to work as a franchise. You not only need to show that you have a good record of sales and profitability, but also consider your own financial situation and the concept.

Most popular franchises are simple or familiar but with a twist - like pizza places that only use local ingredients, or an all-electric car fleet for deliveries. The tricky part is finding something that is appealing to both consumers and future franchisees - this means it can't be exclusive to you or your skills in any way, as it will need to be taught and replicated. Then you'll need to decide if you'll get decent returns.

Is It Easily Duplicated?

Franchises usually start with a profitable business, and then try to replicate the effect in other locations. It can often be a good idea to try out some different locations yourself first before franchising, just to make sure that its success isn't tied to the location. You also ought to do plenty of market research in other parts of the country to see what kind of demand there is right now for the business.

Is It Profitable?

Sorting out your profits and fees is one of the most important parts of structuring the franchise, and you'll need to get hold of some professional advice rather than guessing or going by what other franchises charge.

You'll need a franchise feasibility study which will assess whether the business model is proven, how easy it is to learn, how big the market is and what kind of competition you might have. How many franchises will be needed, and what size will they need to be to keep up with demand?

Then you'll need to consider staff and structure. There needs to be enough to support the network as well as make money for the franchisee and the franchisor. A franchise consultant is usually your best bet.

You'll also need to work out the franchise's finances, ideally sorting out a three year forecast of profits and losses for franchisees and you as the franchisor - these will be helpful at multiple points in setting up the business and monitoring it effectively. The profits need to be balanced out for the franchise to work; if the franchisee notices that the franchisor is earning proportionally much higher, the relationship won't last long.

Bear in mind: franchising will not save an unsuccessful company. Only companies which have decent margins will manage as a franchise.

Be prepared for imminent changes though. You'll need to take a different role in the business - instead of fulfilling the product or service you'll instead be selling franchises and helping to support the franchisees. If you aren't comfortable being in the mentor and salesperson role, perhaps you shouldn't be working on your franchise. You'll also have to give up a certain amount of control - this doesn't mean the franchisees will do it badly, just that they're likely to do it differently.

Finally, consider other options first. You could seek financing or partners to move your business forward as opposed to franchising. Franchising your business will cost a significant amount to set up, and while it can move pretty fast you may see less return than you were expecting.

Image and System

These are the trademarked parts of your business - things like the trade name, the manual of operations and the composition of the franchise formula. It's important to own the rights to the name right from the beginning, and buying a matching domain name before it takes off will definitely help.

Franchising Culture

Getting the relationship right is important as everyone has different motivations, and keeping your franchisees happy is the best way to succeed. And that means starting out on the right foot, with honesty.

As with most types of relationship, failure to communicate can be disastrous. The franchisor needs to be able to explain what is to be achieved, how it will be done and who is responsible for what element of the business. They should also be able to set an example by doing the right thing - if they mess up now it could be very damaging for the franchisees who are taking note.

The best way to progress is if everyone knows what their own responsibilities are. Usually, the franchisor is in charge of marketing, development of the network, and continued development of products or services. The franchisee is mostly responsible for maintaining the good name of the company, working to your agreed manual, and trying to improve the business for everyone. Both members will need to work on building the network under the defined image and brand.

It's important that franchisees know this isn't a business that they can do anything with. They are paying for the right to use the franchisor's brand name and business model, and need to be following the established rules. Franchisees aren't partners, employees or customers, although they may seem like all of these things at some point, but are in fact investors in the promises set out by the franchisor, adding both their money and time to the business. They will expect assistance and support, and the franchisor must supply it!

Being a Good Franchisor

Once your franchise gets going, the most important thing you'll be able to do is support and advise your franchisees to help them operate the system - you need to be ready to do this with the very first franchisee. This should go along with the manual and legal agreement, as well as any systems for monitoring performance. If your initial franchisees aren't supported they will likely fail, which will discourage potential future franchisees.

Manual and Agreement

These are the documents which lay out the legal ground rules of the relationship. Do NOT attempt to do this all yourself - you will need a professional franchise expert to look over them. This may cost a substantial amount, but if you cut corners now it could cost you later on. You should easily be able to make this cost back if the franchise is successful.

£ Getting Support Staff

Once your network has grown, you'll need to hire additional staff to help in the training of new franchisees. You can go two ways for this - you can either hire someone who has experience in franchise management, or train up members of your existing staff to manage the franchisees.

Staff will need to be well equipped in recruiting, training and motivating any franchisees. This will not only require the right kind of people skills, but also knowledge and resources.

Recruitment

After doing initial studies you ought to have formed a good idea of how many franchisees you'll need, and where. Going on from this, you need to look upon potential franchisees not as employees but as partners or investors (although they are definitely not partners), which means not just accepting someone because they have the money to give you.

It's often easier to target recruitment by thinking about the kind of person you would want in a franchisee, and where you might find them. Using professional franchise consultants you can make sure you're spending your recruitment budget as efficiently as possible, and get advice on whether to hire or reject applicants. This will be done in different ways according to the business.

Support

On-going support is incredibly important - franchisees need to feel supported as they continue their business, whether that's in concerns over new products or systems, in training or in marketing. If they decide to move on the franchisor will help them to find a suitable buyer.

Franchisees need to be encouraged to do their best, but also strictly monitored to ensure they are following procedure. One branch doing well can benefit positively on the rest - and negative branches can do the same.

Franchising can be hugely profitable for franchisor and franchisee alike, but only if the procedure of setting it up is followed properly. Don't try to do it alone - a franchise consultant is the only person who can make sure you don't make any mistakes now that could ruin the business much later on!

Hopefully you now have a good idea about what is involved in making a franchise successful. If you need any help or advice, or are looking for expert advice from franchise consultants, please get in touch!