Franchising Your Business: Step 1 – Assess the feasibility
Franchising is big business. There are currently over 940 businesses in the UK that operate as a franchise. They are businesses of all types – retail, fast food, home services, domiciliary care, property sales/management – all benefiting from the dynamic business drive and enhanced levels of customer service that franchising offers.
Franchising is basically a method of distribution – a very cost effective way of expanding to deliver a product or service to customers. It works on the basis that proven, viable business concepts are replicated by other people who possess the desire, drive and determination to run their own business – actually, to run an exact replica of your business. You transfer your knowledge and expertise to those people (franchisees), and give support to help them run their business, getting paid up-front and on-going fees for doing so. As such it’s a great way to expand with minimal capital investment
Let's consider a typical scenario. You’ve developed a profitable business, with protected intellectual property and decent administrative systems, which you’re confident someone else could be trained to operate. With a bit of help from you A. N. OTHER could replicate your business model in another area. So, on the face of it your business has the makings of a franchise. Right?
Well, the answer is not necessarily. Certainly some of the important boxes appear to have been ticked but, as always, there is devil in the detail. Further analysis is essential before you’re able to decide if franchising could actually be a sustainable and worthwhile business strategy.
A feasibility study will provide a detailed assessment of how fit a business is as a potential franchise. It should involve a process that drills into all aspects of the business to determine how franchising would impact it, operationally, administratively, financially and culturally. It will examine the business from a franchising perspective, with the following issues being critical:
- How well proven – the business must have a good track record of success. A new concept should have been piloted for at least a year.
- How distinctive – does the business address a serviceable market with a genuine customer need and offer something different e.g quality, value, performance.
- How simple – the business must be simple to operate, standardise and train.
- How adaptable is it – keeping ahead of the competition requires flexibility. Do the resources and abilities exist to achieve this?
- How resilient – systems and processes (e.g product supply) need to be robust and the concept should not be exposed to threat of short-medium term obsolescence.
- How well protected – trademarks, logos and proprietorial systems must be protected through legal registration.
- How viable – proper incentives and proven financial returns for both franchisor and franchisee are essential. If the margins are insufficient then the business simply won’t work as a franchise.
An experienced franchise consultancy will conduct a feasibility study that addresses all of the above. It will objectively identify how well positioned a business is to franchise what needs to be done so that it is capable of building a network of successful franchisees. It’s therefore an essential first step of an effective franchise development plan.
Connect with Clive Smith
Franchise Intelligence Senior Franchising Consultant
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