If you’ve spent time, effort and money building up a successful business, the idea of letting another business operate under your banner might be a bit alarming. That said, offering your brand as a franchise opportunity can be a way to grow the business more easily than a similar sized expansion that you run yourself.

In this article we look at how businesses can turn themselves into a franchise, and what to consider.

What does franchising mean?

A franchise is an agreement which allows one business to use the branding and model of another business to give the impression they’re one big organisation. If you franchise your business, you’re basically selling permission to use your business model and the brand that you’ve created to a franchisee.

What’s in it for me?

In very simple terms – money and growth. Expanding your established business might be very appealing, but that normally requires considerable investment of all sorts of resources.

Franchising allows you to make money by letting another business take that risk. You’ll normally charge a starter fee, and then receive payments and royalties on an ongoing basis.

Is my business suitable for franchise?

Lots of businesses are, but if the market for your product or service is likely to be short-lived or very localised then it might be time to reconsider. Franchising can also be a considerable commitment – after all, both sides will benefit from the franchisee becoming a success.

Expertise

If your business success is dependent upon the particular skills, expertise or personality of you or your current partners and employees, consider whether this could be replicated with others. It also might not be difficult if there are special audit or control requirements involved.

Consider how much training or set-up your franchisees will need and ask yourself if you have the time to spare – especially as it will take you away from your business.

Are your profit margins large enough to share?

Consider your financial investment in this process – and that of the franchisees too. Take time to accurately estimate set-up costs and remember that each franchisee will need time to develop their business and turn a profit.

Think about the initial fee you will charge and what percentage of their income you can reasonably ask franchisees to hand over whilst still earning enough to make a profit themselves.

Have you created a distinctive brand?

You must be able to offer a distinctive, proven business model that can deliver its products or services to an identified and profitable market. The model that you sell can include pretty much everything, such as certain standards for greeting customers, or specific requirements for decor or using certain suppliers.

The best way to ensure you have a proven, franchise-suitable business model is to run a pilot scheme for at least 12 months. This ensures you have the information you’ll need to decide if franchising is viable, and to aid you in forming a business plan and producing material for potential franchisees.
 

Your responsibilities as a franchisor

There’s more to being a franchisor than sitting back whilst others make a profit for you (unfortunately!). From recruiting suitable franchisees to reviewing their performance, you’ll have an opportunity to set out your involvement in any franchise agreement, but your input will help increase its chances of success.

How do I advertise a franchise?

You could attend exhibitions, such as those run by the British Franchise Association, or work through business brokers of franchise recruitment consultants. You might even advertise through trade magazines or business networking sites.

It can often help to have a prospectus of facts and figures ready for potential franchisees to consider. Like all good business pitches, try to find the balance between undersell and oversell.

Protect your brand

You may need specialist advice to trademark services or products to protect you from any unlawful copying of your Intellectual Property (IP) or potential trouble from unhappy ex-franchisees. The British Franchise Association maintains a list of franchise lawyers with the necessary experience.

Monitor the ongoing success of your franchise

Life moves on and so do customers and clients. What’s successful or unique now may be dated and irrelevant in a few years’ time, so you need to be constantly looking ahead for new ideas and opportunities.

The promotion of the brand and business as a whole, on a national or even international level, is down to you!

Quality control and compliance

Just one bad customer experience with one franchisee can give your entire brand a bad name, particularly if that customer decides to share their experience widely on social media. You will need a system for regularly monitoring your franchisees and gathering customer feedback independently.

This is also an opportunity to make sure your franchisees are maintaining the standards set out in the franchise agreement, and to take appropriate action if they’re not!

Supporting your franchisees

The type and complexity of support your franchisees need will vary hugely depending on the nature of your business and how you intend to structure your franchise network, affecting how much management and financial control you retain. It might include:

• A well-planned, carefully documented training programme
• Ongoing training and refresher sessions
• A comprehensive operations manual that includes franchisee responsibilities, methods, and expected performance and quality standards
• A detailed franchise agreement that details the rights and obligations of both you as the franchisor and your franchisees. It must balance fair and reasonable treatment for franchisees with your responsibility to act in the best interests of the company as a whole.

Ensuring the legal details are watertight and that franchisees are suitable is paramount. If this seems daunting, the British Franchise Association has a useful list of UK consultants to advise you.

Providing you assess your business honestly for its franchise potential, take professional advice at every stage and don’t cut corners, you could be on your way to becoming a very successful franchise network owner.

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