There is currently lot of buzz and hype around franchising as business growth option. Depending on your goal, franchising may be an excellent growth strategy but it doesn’t suit everyone – or every business. Unlike Australia, New Zealand has no franchise legislation defining either what constitutes franchise or what must be provided by the franchisor to franchisee. This means there is potential for people to roll out ‘pseudo franchises’ which can be sold with no systems, inadequate training and without even proven saleable product or service. Inevitably, the life of such an operation is going to be fairly short lived. Before committing time and capital to such project, the potential franchisor needs to do extensive research and seek expert advice to assess demand and ensure they are clear about the financial input, commitment and systems needed to build strong and sustainable franchise.
1. Investigate whether franchising is the best option for you
There are many ways to expand business and, depending on your goals, franchising may or may not be the best option for you. huge amount of work goes into establishing solid franchise business and it means considerable change in focus and role for the new franchisor. Do the groundwork, take expert advice and be sure you fully understand what you are taking on.
2. Differentiate yourself
You need to stand out from your competitors.Clearly establish your own significant and genuine points of difference for both the franchise itself and the products or services you offer. Consider the culture of your organisation – and what you want it to be. Consider whether your brand reflects this. Being clear on this will help you to attract the right type of franchisee – which will, in itself, become point of difference.
3. Prove the systems and model
Establish, document, test and refine your systems and processes so they are bullet-proof when you begin selling the franchise. Make sure there is market and demand for your product and business. Sell the idea to yourself just as you would to franchisee. You need to be convinced that you are offering franchise that has real value – so you have the strength of your convictions as you go to market.
4. Be conscious of your cash flow and available time
You may need additional capital – plan for this before you need it. Also consider the time you will have to spend on developing the franchise rather than running your original business. The transition from owner/manager to franchisor can require considerable investment in both time and money. potential franchisor will need time and money to: develop, document and refine systems; develop marketing collateral to support and sell the franchise; establish Franchise Agreement and Disclosure Documents; train and support new franchisees as they come on board.
5. Don’t be greedy
As franchisor, try to ensure you create win-win relationship with your franchisees. Give more in ‘use’ value than you take in cash value. Structure your licence fees and royalties to be reasonable return for the support, training and business structures you provide to your franchisees, while still giving them the ability to yield generous return on their capital. If they are comfortably profitable and value your support, then they will become your greatest advocates and that will help you to grow your franchise network.
6. Invest in expert advice
Use the services of qualified and experienced franchise consultant, business coach and/or lawyer. Shop around, interview different people and ensure you are satisfied with their credentials. Getting the best advice from the start could save you fortune in the long run.
7. Expect and provide full disclosure
You will expect full disclosure from your franchisee, as from any business partner – and you should offer the same to them. Share your cash flow figures, however they look, your successes and your failures. Don’t inflate your projections for the franchise. Willingness to disclose information and build relationship based on honesty and trust is solid indication of the soundness of the franchise system and commitment of the franchisor.
8. Be selective
Don’t fall into the trap of accepting someone into the franchise purely because they can afford it. Not everybody makes good franchisee and, even if they are wonderfully competent, not everybody will fit with your brand and culture. Only offer franchise to those who really embrace the essence of your brand and you truly believe can be successful – even if it means turning some away.
9. Provide the best training and support structures
Your ongoing success will be built on the success of your franchisees. Provide them with the best tools and support to help them to be successful. Successful franchisees are the strongest marketing channels you can have. That is what will grow the network.
10. Manage your growth
Teething problems are inevitable so don’t aim to grow too big too fast. Manage these, refine the systems and processes and grow the franchise network in managed stages. This will avoid the speed wobbles or worse, an implosion.
Lance Jensen is founder and director of Red Hot Business Coaching in Wellington, contact [email protected]
