Suitability of an existing business for franchising In order to set up a successful franchise, the following factors must be present:
branding
certainty of product supply
proven market and product/service
standards and systems for all aspects of the business
management having the skills to deal with owner operators
turnover and profit
the ability for the business operation to be replicated
What franchising is Franchising is an arrangement where one party (the franchisor) grants another party (the franchisee) the right to use its trademark or trade name as well as certain business systems and processes, to produce and market goods and / or services according to certain requirements. The franchisee usually pays an initial fee plus a percentage of turnover as royalty, and gains:
recognition of an established brand
tried and tested products
a lease of premises and décor of a standard design
detailed systems and procedures for running and promoting the business
training of employees
ongoing help in promoting and upgrading of the products
The franchisor aims to gain expansion of business and earnings for a lower capital investment.
The nature of the new business The governance and management of a franchised operation will be quite different to that of the business you presently operate. Instead of selling goods and services you will be marketing businesses ready to operate, and the training and support that the business investor will need.
The franchising development process The development of a franchised operation involves use of a strategic planning process with extra elements. For more information on what a strategic planning process involves please check out our web page on the subject..
The steps in the process Here is an outline of the stages of the franchising development process:
a review of the business for its suitability to franchise
preparation of a strategic business plan
implementation of the business strategies
Pilot operations We can work through with you how to adapt your existing business (or part of it) as a pilot operation and set up one or two other pilots, in order to demonstrate viability.
Legal You will need the assistance of a law practitioner who has skills and experience in business franchising, and we’ll draw to your attention particular regulatory requirements and franchising practices that we are aware of. We are comfortable working alongside a law professional experienced in this area, for your benefit.
Franchise agreement; area development agreements and related documents You can look at franchise and area development agreements developed by other franchisors, with a view to understanding the requirements of such contracts. A specialist lawyer will require instructions so that agreements can be prepared, and your input into that document is important.
Protection of intellectual property You will need to have protection of intellectual property. If you have not at this point registered trademarks, service marks or designs you may need the services of a patent attorney or legal specialist.
Raising of growth capital Growth capital is usually required at some stage in the development, because you will be incurring legal, accounting, consulting, promotional and other costs. It takes time to reach the point of generating successful sales. You may have achieved one or two sales, but need to continue marketing to prospective franchisees. A long term plan will take this into account.
The time commitment If we provide franchise development serivces to you we’ll outline the expected amount of time that should be allowed for when we are working with you. It will include time spent by us preparing checklists and other material that we’ll use as tools, so that these will be suitable for your project.
The project you will embark on if you decide to franchise the business will demand a high degree of commitment and energy from you in order to succeed. There will be additional time involved in various activities such as market research that you will need to factor in to your commitments.
