franchising

It’s important to understand that franchising is a business growth strategy, and not just a simple operational module. It’s only after you’ve evaluated your business and fully understood where and how franchising can help you achieve your organizational goals that you can take it in as part of your strategy. This can be tricky, and it’s where we come in as industry expert advisors to guide you towards making the right decision. 

To be able to fully understand what a Franchise is, it’s important to look into the three main criteria that determine whether or not a business can meet the definition of a Franchise:

Trademark

Trademark

A trademark is defined as a recognizable mark, name, or symbol that identifies the franchisor’s business. A franchisee has the full right to claim and distribute products and services under the franchisor’s trademark.

Significant Control

Significant Control

Some of these elements include site approval, site design or appearance requirements, specified hours of operation, accounting practices, personnel policies, required promotional campaigns, training programs, and the provision of a detailed operations manual.

Required Payment

Required Payment

To actually go through the franchise process, a certain payment must be made at the beginning. This payment includes the actual franchise fee, bookkeeping charges, services fees, rent fees, and even training fees.

However you choose to label the process, if you’re looking into a business relationship that encompasses all three of these concepts, you are visualizing a franchise.

A franchising company (called the franchisor) licenses its trademarks and proven business methods to other companies (called franchisees) for a recurring payment, a percentage of gross sales or a fixed fee. Franchisees start replicas of the franchisor’s business, and run them. The long-term business relationship between both parties is governed by the Franchise Agreement that outlines the privileges, terms, conditions, restrictions and other details of the arrangement. The Franchise Agreement typically entitles the franchisee to initial training, an Operations Manual, a start-up package, a delineated area of operation (the 'territory'), ongoing support, national and/or regional marketing support, and the trademark license. The Agreement entitles the franchisor to various payments and fees, and asserts their control over the trademark(s), the way in which the products and services are marketed and sold, and the quality and standards of the business as a whole.

Determining the franchisability of a business takes a lot of analysis, but there are key criteria that help in assessing how ready a company is to franchise, and how successful of a franchisor it can be:

Credibility

Credibility

Credibility is key. Prospective franchisees pay a lot of attention to how credible you are as a company. After all, they’re investing in your concept.

Diferentiation

Diferentiation

The franchise world knows a lot of competition, which means you need to identify what makes you different than every other company with a similar concept out there, and base your competitive advantage around it. 

Transferability of knowledge

Transferability of knowledge

This is generally explained by how well you as a franchisor are able to educate your prospective buyers.

Adaptibility

Adaptibility

Not every concept can be accepted in every market. The ability to adapt to different areas and customize your product accordingly takes great skills.

Refined and Successful Prototype Operations

Refined and Successful Prototype Operations

A refined prototype is necessary to demonstrate that the system is proven, and is generally instrumental in the training of franchisees.

Documented Systems

Documented Systems

Every process and every system must be documented to make sure that the flow of communication with the franchisees is understood and effective.

Affordability

Affordability

Franchises can cost a lot of money, and you need to see whether or not the possible buyers can afford it. Franchisees are after all investing in your concept.

Return on Investment

Return on Investment

Other than money, franchisees are investing their time and effort into your concept, which means there has to be enough generated profit to ensure an adequate ROI.

Market Trends and Conditions

Market Trends and Conditions

Identifying current market trends and being able to successfully adapt them is what assures growth in the twentieth century. Franchisees look for companies whose products they know will remain relevant after a certain period of time.

Capital

Capital

To be able to franchise you will need a certain amount of capital and resources depending on the scope.

Commitment to Relationships

Commitment to Relationships

Successfully building long-term relationships with franchisees.

Strength of Management

Strength of Management

The success of a franchise depends greatly on how well it is being managed.

After answering the two major questions before considering franchising:  Is your business franchisable?  Is franchising the right growth strategy for you?   you have to undergo the below steps:

Business plan

Business plan

Once the decision to franchise your business has been made, as a franchisor you must put together a business plan that will highlight your company’s main objectives and strategies, as well your growth plan for the coming years.

Operations manual

Operations manual

A full manual should be developed to serve as a guide for all your franchisees. It is used as a sales and training reference for franchisees, assuring consistency and good quality performance across the whole chain.

Legal documents

Legal documents

To be legally entitled to sell franchises, you must undergo a certain legal agreement process that is facilitated with the presence of a professional attorney. 

Marketing plan

Marketing plan

The main purpose is to sell franchises, which is why a straight to the point marketing plan must be developed to be able to communicate the message correctly to possible franchisees. 

Marketing tools

Marketing tools

The right marketing tools will help you better sell franchises.

Sales training

Sales training

Since the idea of the company will be to sell franchises, it’s important to use the right sales techniques to get successful results. Therefore, understanding the legal frame that governs what is and is not permitted in franchise sales is very important.