Starting a Franchise: Your Essential Checklist

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  4. Starting a Franchise: Your Essential Checklist

Are you looking to expand your business? Franchising is a great option for those who want to avoid getting bogged down in day-to-day management of multiple units. If you are a franchisor, instead of setting up and running new branches yourself, you grant one or more licences to other franchisees. They are your flagships, who trade under your brand name and follow your business blueprint.

Franchising can help your business break into new geographical areas. It can also help to strengthen your brand image, and increase your profits. Marketing your business to potential franchisees in the right way, and ensuring your brand is in safe hands are central to a franchise’s success. Our essential checklist is here to guide you through this process — ensuring your next business move is the right one.

Is franchising right for your business?  

When thinking about successful existing franchises, fast food chains are often the first to spring to mind: KFC, McDonald’s, Subway, Burger King, and Papa John’s. These brands have universal appeal — what they have to offer is popular virtually everywhere. They also have a consistent, set business blueprint: whichever Mcdonalds you visit you know what to expect on the menu, the type of service you’ll receive, and what a Big Mac will look and taste like. But this is not by chance. Behind the scenes, franchisees run their individual businesses according to very clear rules and guidelines.

The British Franchise Association member directory includes a vast range of businesses: from financial advisors and graphic designers, through to specialist cleaners and retail outlets. Whatever the nature of your business, virtually any type can be made into a franchise.

Can you demonstrate that your business is successful?

Ultimately, you will be marketing your business to potential franchisees in return for fees. Before coming on board, franchisees will want to be sure that your business is a moneymaker. Even if your business has huge potential, if you’re still finding your feet and have yet to develop your customer base, now’s probably not the best time to consider franchising. Wait until you’ve been trading for at least 12 months, at which point you can present strong growth figures. This way, you can provide convincing evidence of a successful business model.

Can your business model be replicated?

If your business has been built upon personal relationships between you and your customers, replicating that success with someone else at the helm is going to be tough. If it’s the product or service itself that draws customers in, there’s far more opportunity for it to become franchisable. Also, some businesses only work in certain geographical areas — providing specialist support to companies only present in certain locations, for instance. The larger and less geographically defined the market, the greater the scope for setting up multiple operating units.

Can it be taught?

In other words, can you ‘systemise’ your business? Can you define what you do and precisely how you do it, so a franchisee can learn the ropes and go it alone with the same model? If the way you operate is all in your head and you haven’t yet mapped it out on paper, this should be your top priority before delving further into the franchising process.

Get expert help early

A franchise consultant can offer practical help on getting your business in order; helping to present your business as a viable franchise and finding potential franchisees. Once you’ve decided that franchising might be for you, early input from a consultant can help you map out how you are going to get the process underway. You can find details of suitably qualified advisors through the British Franchising Association directory of consultants.

Develop your franchise format

The two key goals to consider when putting together your franchise format are:

  • Convincing the right franchisees to come on board
  • Ensuring that each new operating unit can be run capably and profitably, to ensure quality and consistency.

A simple way to promote your business is by telling its story. This could include:

  • How it started
  • How it has grown
  • A breakdown of your growth figures from your business accounts

You must also demonstrate a market demand for your services, pointing to research that shows there is enough customer interest for new franchises to make a profit.

Pilot franchise operation

Your franchise consultant may also advise you to establish a ‘pilot franchise operation’. This typically includes a brand training programme, operating manuals, staff training packages, and a commitment to provide promotional material, flyers, and brand-wide advertising campaigns. You’ll also need to give projections (backed up by evidence) on key matters, such as how long it’s likely to take for a franchisee to turn a profit.

Franchisee’s rulebook

Your operations manual is the franchisee’s rulebook. It sets out your operating and management requirements, customer service standards, performance expectations, and pricing structure. Franchisees choose this way of working because they want to step into a well-defined, structured model. A well-structured operations manual enables prospective franchisees to decide whether they’re a good fit. A manual that lacks clarity won’t inspire confidence and could attract the wrong type of franchisee for your business — it has to cover all bases.

Set your fees and draw up a franchise agreement

Franchisors charge an initial fee for buying the franchise (typically around £15,000 for a small business). You then charge continuing fees based on your franchisees turnover, so you have a vested interest to ensure the brand is as strong as possible.

Fee structure

Setting a fee structure involves getting the right balance between earning a healthy revenue stream for yourself, whilst ensuring that your franchise offer remains competitive. Your franchise consultant should advise you on how to get the balance right.

The exact details of your fee structure and important details, such as trademark usage and restrictions on franchisees’ activities, are all set out in the franchise agreement. This is a complex legal document, so you’ll need to enlist a franchise lawyer to draw it up.

Market your franchise

As a starting point, a professionally produced franchise brochure is invaluable for showcasing your offering — it shows you’re serious. Many new franchises exhibit at shows such as the Franchise Show and Franchise Direct Expo, which attract large numbers of potential franchisees. A BFA listing can also be great for increasing your franchises visibility.

If you’d like to know more about organising your business structure and processes to help make you ‘franchise-ready’, head to our help centre for further advice.

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