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FRANCHISING YOUR BUSINESS: WHAT DO YOU NEED TO CONSIDER?

Wednesday 23rd June 2010

In times like these, when we have seen many businesses go bust over the past year, and many more struggling

business owners start to look more closely at the strengths and weaknesses of their own business. They want to secure the future and do whatever they can to protect the livelihoods which rely on the success of the business.


It is at this time where many business owners may start to consider franchising, as not only can it hugely strengthen the brand and reach of a company, but it can also act as a very good method of securing its future – but only if done well.


The first thing to understand is that franchising is not a tool to fix a bad business. It is not there to provide injections of income from other people to underpin the failing elsewhere. Franchising is a model used to replicate a successful and proven business, using the investment and skills of new individual business owners, who will be trained and supported to run the business under the agreement, conditions and format, as proven and agreed. So think about it; if you use it on a bad business, all you get is a bigger bad business – and a lot of upset franchise owners!


The formation of the British Franchise Association (bfa) in 1977 marked a significant leap forward in the industry and its approach and responsibly to provide a professional, ethical and subsequently very successful industry. Set up to accredit and promote excellence in franchising, the bfa accredits franchisors based on a code of business practice and the European Code of Ethics for Franchising.


As a result franchising now encompasses a multitude of business types and consumer markets and has well established itself as a respected and highly regarded business model. This means that business who are now looking to franchise have some guidelines and standards which they can work to – giving them a better chance of success and a better opportunity for potential individual franchise owners (franchisees).


To franchise a business is not something that can be done without thought. To start, the business needs to be proven – and I don’t just mean the reference above to being proven, I also mean that it actually needs to have happened – not just the idea on paper. You need to show potential franchisees that the business works in the way in which they will need to run it. It also needs to be transferable, by which I mean it can be run in multiple locations, using the same system, brand and quality. As a key point in this, the franchise also needs to be something that you can teach people to do. There is little point having a franchise that only three people in the world would be capable of running.


If your business passes these three simple, but vital, checks, then you can start to look at what you need to do in order to turn it into a franchise. This process will require the production of operation manuals, to show how everything must be done, and a franchise agreement will also needs to be written to set out how the relationship and agreement between the franchisors and franchisee will work. It is also there to protect the network and your brand. This will require expertise from solicitors and consultants, which can be accessed via the bfa’s accredited Affiliate Members list online.


You will also need to think about territory; how you are going to set out what areas people may need to limit themselves to if they join your franchise. You will also need to think about the training and support that will be required. If you are investing into franchising your business, then you will need to make sure that your franchisees succeed. This will require thought about the core requirements they may have, both to get them up and running and then on an ongoing basis. 


All of this planning, building and ongoing commitment will cost you money and so you will also need to think about how to finance the work. At this point you must make sure that you don’t underestimate the costs and try to cut corners. A franchise is a successful business model, but only when done well. Don’t try and cut costs in professional advice, otherwise it is likely to end up a lot more expensive down the road. At the point of speaking to banks, it is advisable to make sure you speak to the three bfa accredited banks.

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