As a potential franchisee, what should you be looking for in a franchisor?
You need to be really sure about your investment. You are going to give up your job, with associated benefits, and pay to join a new business you know nothing about and where you have to closely follow a set of rules and a blueprint you don’t control.
One of the first considerations is the return on your investment, but don’t forget to take into account the fees you will have to pay to the franchisor. The fee structure and the projected return should be clearly explained to you once you approach the franchisor.
The bigger the franchise, generally the higher the upfront fees you would expect to pay.
You are looking for a successful model. If it is a well-known franchise, you will be more confident, but remember that returns may be lower, and fees higher. During the negotiations ask to see evidence of successful operators.
Choose a business that interests you and that you will enjoy working in. If you love travel and have an encyclopaedic knowledge of our planet, then you might look at becoming involved in the travel industry. If you love cooking, get involved in the food industry. If cars are your passion, look at a car dealership.
Check there is a robust training, communications and support system. You want ongoing training for new staff .This is largely what you are paying for, the expertise, the tried and tested processes. You need to be sure their system and processes are clearly explained in writing and templates or documents are available to you.
The franchisor should have a website and support staff to help you with training and launch issues, and a robust IT system that can support franchisees.
If the franchise is well established they should be able to give examples of franchises who have been with them for many years .You want to feel sure that they will offer you strong leadership, effective management and excellent communications.
As a potential franchisor, is your business suitable to be a franchise?
Evaluate your business. It needs to appeal to consumers and franchisees. Is it scalable, will there be economies of scale to be achieved? Can it be systemised and replicated or does it depend on a unique factor such as your personal unique skill or personality.
Will the returns be good enough to sustain your fees and the franchisee?
It might be useful to have several sites operating yourself, before you try to franchise. In this way you can demonstrate to yourself and others that the success can be replicated in another location
Research the market, check consumer demand and competition across your target franchise area, in the same way as you would if you were going to launch a business. Is anyone else running a similar or competitive franchise? How are they doing? Can you differentiate your franchise from theirs?
Your new role
Can your business run without you, because you will not be able to devote time to running it any more, you will be running the franchisee programme. This is a new and different role for you.
You will need selling skills, and have to be comfortable with teaching and mentoring. Can you relinquish control over how your business is run. If you are OCD about controlling things, will you be comfortable with handing local control to franchisees?
Consider other routes, such as JV or partnerships. Evaluate which will be best for your business in the long term. Construct several business plans for each scenario.
Can you afford the set up costs and legal fees required to launch a franchise? The franchising industry is heavily regulated, so make sure you take legal advice and meet all the requirements in your region.
Keep in mind that this is an irrevocable step to take, there is no way back. Once you have franchisees on board with you, you are fully committed and can’t roll the business out yourself once you have franchisees in a territory.
Once you are satisfied this is the correct route for you, you need to begin the process of preparing to register with the relevant regulators. It will take a significant investment of time and money to develop the plan, register and be accepted. We will consider the decisions you need to take in the next part.