Many business owners consider expanding their businesses through franchising, however, unless well planned, franchising your business can cause a huge amount of heartache and pain.
Detailed below are key factors that should be taken into consideration for you to be able to successfully franchise your business.
1. Proven Products and Systems
Anyone buying a franchise is buying into a proven system and products. Make sure that you have a track record of success as well as the necessary systems in place that will ensure that your business is running smoothly. This includes ensuring that your business has a proven track record of profitability. It is recommended that you run a pilot operation in each market first before franchising your business model.
2. Customer Demand
This is often the most overlooked aspect of franchising. Here it is important that you do the necessary research into whether there is a demand for your product or service in each area that you are considering franchising. Not only do you need to ensure that there is a demand but you need to ensure that your business model can be duplicated.
In a franchise environment, you are essentially providing other people the opportunity to use your products and services within a territory. Whilst finding the right partners is critical to your success, it is also of utmost importance that the “foundation” of any business relationship is well structured to protect your intellectual property and the future success of your brand. A key element of this foundation is the legal agreements, which include your Master License Agreements, Franchise Agreements, Franchise Disclosure Documents and any other licensing agreements that may be necessary. It is imperative, that you consult with your lawyers and financial consultants (both of whom must have experience in franchising) as well as an experienced Franchise Consultant, prior to launching your Franchise. This needs to be done for each country that you plan on entering.
4. Operations Manuals
This is the backbone of your business. Operations manuals ensure that your business can run on auto-pilot. Furthermore they ensure that all team members know what to do and know how to “FOLLOW THE SYSTEM”.
When developing your operations manuals make sure that your manuals include a step-by-step approach to all activities that are required to be followed in each franchise. Do not assume that franchise partners will know what to do. It is also recommended that you test the procedures from time-to-time to ensure that everything is included as well as to ensure that the procedures are still up to date and relevant for each territory that you have expanded into.
5. Cashflow, Cashflow, Cashflow
The lifeblood of any business is cashflow and this is no different in a Franchise operation. In fact, I would go as far as to say that it is particularly important in any business that is currently going through a growth phase as is the case when embarking on a franchise growth strategy.
There is an old saying that it “takes twice as long to reach profitability and twice as much cash”
Make sure that you have at least 24 – 36 months cashflow in your business prior to starting to franchise your business.
6. Training and On-Going Support
As mentioned in point 4 above regarding operations manuals, the development of world-class training and support systems are invaluable to the success of your franchise operation.
Ensure that you appoint a suitably qualified training specialist to develop your training and post training support systems. This needs to be in place prior to selling your first franchise license. New Franchisees should not be left with the feeling that they are Guinea-pigs in the system. They have invested their hard-earned cash in a system that has been tried and tested and if you want to ensure that they succeed, their journey to success starts with the training program that will need to complete before they start their operations. Great training programs also ensure quality delivery of the products that your business is offering to the market.
7. Franchise Selection and Recruitment
The results of your first few franchise partners will have a large impact on the ability for you to grow your franchise network thereafter.
You need to identify the experience and characteristics of your ideal franchise partner and be sure that you evaluate each potential franchise partner against these requirements during the selection process. I always recommend that your Franchise partners “buy-in” to your Company Vision, Mission and Values as a start. The technical skills are easier to train thereafter. There is a saying that I believe is very appropriate in franchise selection:
“You hire for technical skills and fire for behavioral skills”
Ensure that your potential franchise partners have the right behavioral skills by requiring them to complete appropriate behavioral assessments.
Your first group of franchise partners can get the ball rolling for you in the market. If poorly selected, they will hinder any growth objectives that you might have.
8. Marketing and PR
As stated in the point above regarding training, you need to ensure that your marketing and PR strategy is well thought through and in place prior to launching your franchise.
9. Franchise Support
Building relationships with your franchise partners and providing on-going support for them will be a key differentiator for you as you launch your franchise. Make sure that you stay on top of the challenges that they are facing and provide the necessary support for them to be able to grow through any challenging times. Continuously evaluate how to keep communication lines open to your franchise partners. Ensure that you have a good record keeping system of any interactions that you have had with your franchise partners.
The above points if well thought through will provide a strong foundation for the development of your franchise system. Above all, make sure that your system is adaptable to be able to move with the times and to take on any suggestions that your team may feel will improve the system.
Reference: Article by Pieter Scholtz, Co-Master Franchisor in Southern Africa for ActionCOACH