Ingredients for a franchise
On 30th September 2015, Clive Smith held a webinar that covered all you need to know to franchise your business. Over the course of the hour-long webinar, Clive takes us through the background of franchising, the principles, the mechanics and the requirements. In this video he takes us through the ingredients needed to franchise your business.
So what are the ingredients for a franchise? Firstly, they are all about being proven and you must be a proven business. This is not to say it is impossible to franchise when the business is still in its formative stages but it is very unusual. Franchising is based on encouraging the right people to come in and become a franchisee on the basis that they are convinced the business you have created is one that they can also make money from and operate.
The business must be one that can be duplicated. If there is some highly sophisticated technology within it, it may well be that duplication is not an option. Or perhaps the costs are too prohibitive, or there is a technical skillset that the franchisees would need which would not be able to be duplicated. In most businesses there are elements that can be duplicated but if there is no practical way you can duplicate any part of the business then franchising may not be the way forward for you.
The business must be one that can be easily taught. It is not particularly helpful if your business requires particular skills required to operate it – skills that require 2-3 years of learning to master. For instance, if you were a plumbing and heating business it may be that you cannot franchise being a self-employed plumping and heating technician because you would need to spend up to two years training the individual to achieve the right standard and to be qualified. In this case you would have two options; one is to franchise to people who are already qualified in order to aid them with their business, or you would create a management franchise in which the franchisee employs plumbing and heating technicians.
During the training period, the individual will not be earning money as their business will not be operating yet. This is why it is important that the training is as practical as possible. Usually training courses are a maximum of a month or two long in duration.
The business’s intellectual property must be protected. You must have a registered trademark, you must ensure your software licenses are secured and it is very important that any supplier agreements that are crucial to the business are copper-bottomed. It is no good creating a business that requires a supply from an external source that in a year’s time will say you cannot get access to the supply because your agreement has expired.
There must be money in the business for both parties. You have to ensure that the franchisee is able to make a decent return on their investment and make a decent living. At the same time, you must make sure that you as the franchisor generate a good profit and cover all the costs of any training and support you supply to the franchisee.
A franchise is built on a culture of trust and respect. The management style is different to a conventional directly-employed business. In a directly-employed business you can, within reason, dictate your employees and demand that they perform to certain levels. In a franchise you have to work with your franchisees in a cooperative manner to ensure that they comply with the requirements that you put down. There are controls and mechanisms in place that help enforce compliance.
A franchise lawyer in conjunction with a consultant will put all of those systems and controls in place to ensure that all of these ingredients are properly mapped out and structured to maximise the performance of your network.
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