Our article in Business Franchise Magazine this month

Nick Williams, a managing consultant at Ashtons Franchise Consulting, has written an article for the December issue of Business Franchise Magazine.

Can YOUR business be Franchised?

Franchising is a proven method of business expansion. It has been used successfully in almost every business sector by companies of all shapes and sizes. But does your business have what it takes?

Before beginning the journey to what can be a very rewarding business expansion strategy by franchising it makes sense to use consultants to help you undertake research into your business and its current suitability for Franchising.

You need to be sure that this is the best route for the business, that the management is prepared to cope with the changes Franchising will bring, and that the timing of the launch will maximise the chance of successful Franchisee recruitment. Your business is ready for Franchising when you can demonstrate the following essential factors:

1. Differentiation

In order to compete effectively in the busy franchise marketplace, a franchise organisation must be adequately differentiated from its franchised competitors. This could be by way of a distinctive product or service, a reduced investment cost, a unique marketing strategy, or specific target markets.

2. Credibility

Your company must be credible in the eyes of prospective Franchisees if they are going to invest their money in your Franchise. Credibility can be reflected in a number of ways, such as the size of the organisation, the number of units, the number of years in operation, the quality of your publicity, consumer awareness of your brand, the success of the pilot operation, the financial return, the lifestyle and enjoyment of running the operation and the strength of the management team.

3. Market trends and conditions

The market analysis acts as a general indicator of potential success for you and for the Franchisee and should be used to refine your long-term plans. It is important that the market for your products or services is viable in the medium to long term. Is the market growing or consolidating and how will that affect your business in the future? What are your franchised and non-franchised competitors doing? Are you likely to be able to find a buyer for your Franchise network when you decide to move on?

4. Successful pilot operations

You can’t Franchise an “idea”.An initial “pilot” operation is necessary to demonstrate that the business is viable. It will also act as a testing ground for your new products and services, marketing techniques, merchandising, and operational strategies in the long term.

5. Transferability of knowledge

It will be important that it is relatively straightforward to teach a Franchisee about how to operate a replica of your business. You must also be able to provide the training in a reasonably short period of time. If your business is complex you may find that your recruitment will be restricted to prospective Franchisees that are already experienced in your field, thus reducing the marketability of your proposition.

6. Documented systems

All successful businesses have systems and, in Franchising, these must be documented and communicated effectively to your Franchisees. Your company policies, procedures, systems, forms and business practices should be presented in a comprehensive and user-friendly operations manual, which is provided to Franchisees as part of their Franchise Package.

7. Affordability and return on investment

A franchised business must be affordable to its prospective Franchisees and profitable- both for the Franchisor and for the Franchisee. In addition to this, the Franchise must provide enough profit after payment of fees to the Franchisor for the Franchisees to earn an adequate return on their investment of time and money. This profitability is relative and should be measured against the investment to provide a meaningful figure, with Franchisees achieving a proper return on investment by the third year of trading.

8. Commitment

Successful Franchisors are committed to building long term relationships with their Franchisees that are mutually rewarding. There is a strong link between the strength of these relationships and the profitability of the Franchise. Strong franchisee relationships enable the Franchisor to sell their franchises more effectively, introduce necessary changes into the system more easily and motivate franchisees to provide a consistent level of service to their customers.

9. Strength of management

The most common contributors to the failure of start-up franchisors are understaffing and a lack of experience at the management level. New franchisors often try to do everything themselves, taking on roles in which they have little or no experience. Consider how you will cope with the resource demands the Franchise will bring, such as franchise marketing, lead handling, franchise sales, training and multi-operations management, and build a strong team to support you…and know that there is plenty of support available to you in this with us as your franchise consultants

10. Capital

Franchising is a relatively low-cost means of expanding a business but it is certainly not a “no-cost” option. A franchisor needs capital and resources to implement a Franchise Development Programme and to recruit Franchisees. There should also be adequate finance available to support the growing Franchise network, especially in the early years.