Franchises are popular as a business model because they are proven to be lower risk and enjoy higher success rates than ordinary start-ups. As a comparison, after two years, over 80% of ordinary start-ups have ceased trading; in the same period, 80% of franchises are still in business. This because franchises are generally based on a business model that has already proven to be effective and profitable.
There are eight key phases in developing a franchise:
1. The Opportunity: a document which summarises the key elements of the franchise, such as: the trading history of the flagship business on which the opportunity is based; what the scope of the business is, (what the franchise gets for his/her money); what the franchisor contracts to deliver as part of the deal; sales and marketing strategy; territories; start-up and ongoing fees; IT systems; and the franchisee recruitment process.
2. The Operations Manual: the single most important item you will invest in – and arguably you should seriously consider producing one even if you are not going to franchise. By clarifying and articulating all the systems and processes in the business (financial, operational, sales, marketing, IT support, human relations), you ensure that everyone in your business understands precisely how things are done, both on a day-to-day basis and strategically.
It will help you develop a successful, profitable business that works without you in it. To do that, you have to train your franchisees to run their business as successfully as you run yours – putting your thoughts down on paper and creating a master set of instructions that have been proven to work.
3. Contracts: the detailed legal basis for the ongoing business relationship.
4. Franchise package: a detailed sale document, outlining the precise terms and conditions of the franchise: putting the ‘meat on the bones’ of the Opportunity document.
5. Franchisee recruitment: the process you will put in place to grow the franchise and the implementation of that process.
6. Franchisee training: planning and implementing both an initial programme, to ensure franchisees understand exactly how the business model works, what they have to do to make it a success and a regular programme of ongoing training.
7. Launching the business: the first 3 – 5 franchisees need to become a model for all future recruits. Ensuring they are successful will go a long way towards making the entire venture successful.
8. A plan for controlled growth and support: how many new franchisees are desirable, feasible and sustainable? How will they all be integrated successfully into the existing group? What help can they expect from existing franchisees, in terms of knowledge transfer and shared experience?
Each franchise is unique, however, the foundations for success are rooted in a common process. Whether there is an existing system or a brand new one is being devised, the areas above need to be covered.
If you are seriously considering a franchising model for your business, it helps to have an advisor who understands the detailed way the model works, from the documentation, manuals, contracts and processes to training and sales support. This is where ibd advisers can help.