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  • Jun 17, 2015
  • clive.smith
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What would it take to franchise your business?

The benefits of franchising can often be difficult to ignore by the owner of an established business. They’ve created a successful business model. With training, others could replicate that model and enjoy similar rewards.

So, not surprisingly, thoughts turn to franchising as a way to expand – charge a decent up-front fee to budding entrepreneurs for the transfer of extensive knowledge and experience. Then, sit back and let their enthusiasm and drive build the business. Simple!

If only it was that easy...

The devil is always in the detail and it’s an anecdote that most definitely applies to franchising. Operating through a network of franchisees demands an entirely different management culture to a conventional business comprising directly employed or casual staff. This culture and its implications have to be fully understood by any prospective franchisor before a franchise is ever sold.

The most notable difference is that franchisees simply can’t be managed in the same way as employees. Franchisees will have paid you a pretty hefty sum of money to be granted the right to operate a replica of your business using your methods and brand. They expect to be taught what to do, but not necessarily told what to do. They retain a level of independence, being responsible for decisions affecting the day-to-day performance of the business. So, it’s important that a franchisor respects this independence. You cannot easily dictate change unless the franchisees actions undermine your brand and its reputation.

board-751991_640To create a successful franchise a franchisor must retain an on-going interest in the performance of its franchisees. Good franchisors guide, mentor and facilitate - they recognise that fundamentally their role is to help franchisees run their business and represent the brand as effectively as possible.

A franchisor will also be required to provide support to its franchisees – a royalty fee will be charged for this. Typically, franchisee support will focus on specialist functions that the franchisor is better resourced to handle centrally than a franchisee could handle individually. For example, preparing marketing material and campaigns, managing a corporate web site, operating a call centre for the central handling of customer calls and conducting R&D. A responsible franchisor will also ensure that franchisees are kept regularly informed about key issues affecting the business – legislative changes, product updates, new opportunities etc.

Retaining an interest also means careful monitoring of franchisee performance.

A good franchise agreement will protect the franchisors intellectual property and its use by franchisees. Therefore, having robust processes that record individual behaviour and conformance is critical to a well-run franchise. As is having structured procedures contained in an Operations manual for dealing with any non-conformance or failure to perform.

Establishing a culture of mutual trust is pivotal to a franchised business. Franchisors are placing responsibility for the delivery of their service or product in someone else’s hands, of their choosing, usually for a period of at least 5 years. It’s a risk but as with all risks steps can be taken to minimise. Applying a disciplined recruitment strategy is an all-important first step. On an on-going basis open dialogue, regular communication, co-operation and absolute clarity about standards and values are all essential ingredients to a productive franchisor:franchisee relationship.

The biggest fear that many prospective franchisors have is a loss of control. Its understandable, after all they are giving up the right to manage in the franchised area/location. This lack of control can be mitigated by training and monitoring franchisees to business growthcomply with a rigorous set of procedures for all aspects of the business. But, however prescriptive you make your franchise it will always be the case that franchisees will put their own ‘spin’ on how the business is run. Which may frustrate. Or, it can be seen as a force for good – enlightened franchisors will embrace ideas for improvement from franchisees.

Franchising can be a great way to maximise the prospects of a business. The sales drive that individual business owners provide can be a real game-changer. But, adopting the right systems to effectively ‘manage’ the activities of franchise partners is key to making it work. Of even greater importance is establishing a culture of trust, respect and co-operation. Only with that in place will the real benefits emerge.

Connect with Clive Smith

Franchise Intelligence Senior Franchising Consultant

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