Franchising can be a very effective way to expand your business rather than growing through increasing employee numbers or buying similar businesses. You may argue it’s the best of both worlds in that you don’t need to do either!
How do you build up a business which can be franchised? What sort of things should you focus on? How do you make this attractive to potential franchisees? What are the pitfalls?
As a tax accountant who has franchised her brand for over six years to other chartered accountants, here are my personal tips to get you started.
You should provide a clear brand and image with a track record that is easily explainable to a potential franchisee and their customers.
What contacts, networks and followers have you built up? Why do you think there is enough business for others? Are you in a growing or stable market? Why should they sign up with you?
A franchisee needs to know how they can be expected to repeat your success. Will they be able to make a head start because of your procedures, business model or contacts? Is there a big enough market? Is it driven by geography? If so, how do you know another area will work?
A franchisee needs to understand what they are paying for. It might be training, branded assets, a website or new clients. Will there be one fixed fee or a menu of options? Will you charge different amounts to each franchisee? Will there be regular add-on charges, such as for client leads, email storage, social media support? Or will you simply charge the usual 10 per cent of sales?
Are there less tangible benefits implicit in your fee such as a tried and tested business plan, your network of contacts, ongoing training by yourself, email and phone support?
Once you have answered the above:
General solicitors are likely to be on a learning curve. Franchise solicitors who see these agreements daily can offer invaluable advice on other things to consider, such as how you or the franchisee terminate the agreement, what constitutes a breach of contract, and whether the agreement should run for the usual five years. This is quite an investment so make sure you get it right. Franchise solicitors can also draft the operating manual and other documents, but this might not be necessary.
Once you’re happy with the agreement as your core legal document, try to keep all franchisees to these same terms. The operating manual should be used to reflect changing business needs such as responses to different market conditions, which you may be able to regularly amend yourself without incurring further solicitor costs.
If s/he is successful, you’ve demonstrated that not only was your own business successful, you’ve managed to train up someone else to repeat your success. This makes your franchise a lot more attractive to the next person. You’ll also learn a lot from the first franchisee. Make sure you amend and adjust your manuals and training accordingly.
If a potential franchisee isn’t a good fit don’t let your growth ambitions take precedence. You need to protect your brand for you and other franchisees, so make sure potential franchisees are suitable and will reflect your brand well.
It’s tempting to join franchise organisations, exhibit at franchise shows and produce lots of franchise marketing material. This won’t necessarily make your franchised business a success.
You’re likely to find new franchisees from your own contacts and your franchisees’ contacts, so see how this works first. If you want to expand quickly, write a marketing strategy first to identify the best use of your resources.