While franchising has slowed down in recent years from the rapid rates seen in the 1990s to early 2000s, it is an exciting method to grow your business. But the decision to travel down this route is often a more ‘bright shiny light’-driven campaign rather than a well-thought-out plan. And this, in turn, ends in failure. However, if done correctly, franchising can be a very effective way of expanding and growing your brand quickly.
For well-run businesses with systems and processes, procedures and rules, franchising will provide benefits and satisfaction for all parties. However, be under no illusion. This is not an easy path to take. Establishing a business model that can be considered for franchising has to be undertaken with education, skill, patience and, not surprisingly, capital.
And I have one bonus tip that I will explore a little further in the article – you simply must have a defined target market.
So, what should business owners do if they believe their business has what it takes to become a franchise opportunity?
- You need to be assertive but fair, and clear on the vision. Who needs to do what by when? You will continue to work harder with even greater focus. You’re accountable to other business owners buying into your vision.
- You must have strong ownership of the brand and the ability to share it with a new network of business owners who must and will embrace it as their own.
- You are OK with not having all the greatest ideas in your business, and more important, you are OK with encouraging this.
- You will have taken legal advice and have a franchise agreement that has been developed with an authentic reputable franchise development and legal team.
- You will develop a training arm for all franchisees composed of internal and external consultants/trainers.
- You must have a recruiting system for franchisees that is more about de-selection than selection.
Before anyone invests in your franchise, you need to be absolutely sure that you can define who your target markets are. You need to be clear about who will buy the product and why. You need to be able to identify them with great clarity. If you are a bookstore owner and are considering a franchised bookstore, it’s no
good to simply say, “I know there are plenty of book lovers out there, so I’ll be fine.”
There’s no room for vagueness, guessing, crossing fingers or hopeful estimations when it comes to this stuff. The skills and tools required to create an idea are very different from the skills and tools required to grow market share.
Having made the decision to franchise your business, your franchisees are going to want to know that this will provide them with a product or service that they think other people or organizations want to buy. But thinking this and knowing how and why it will happen are two very different things. At some point in their busy lives, with all sorts of other options available to them, you want people to look at the product and say, “Yes, this is what I need.” These people or organizations are referred to as the target market, and you and the franchisees
need to know exactly who they are, and how you’re going to grow and service them.
How do you know when your business is ready to be considered for franchising? Here are my top seven tips:
1 Proof of concept, establishing a franchise system and preparing it for market can take as long as three years. The business needs to be making a healthy predictable profit – this is non-negotiable.
2 The business should be making a positive cash flow without key/critical staff being present. Having the
right management structure is also non-negotiable.
3 There needs to be uniqueness – but not extreme uniqueness. The best uniqueness is often found in a
customer delight system.
4 You have a predictable operations procedure with good systems and ‘how-to’ manuals for all tasks, including testing and measuring for all activities.
5 You have a proven lead generation system that delivers leads within a cost-per-lead budget.
6 You have a progressed and defined sales system to ensure a 60% conversion on all leads, regardless
of the sales skills of the person selling.
7 You have a culture of open, honest communication.
So how do you tell when your business is suitable for franchising? When you know your business inside out! Your business is ready when you are not motivated by the initial capital investment of a franchisee. Ultimately, you will be ready when you already have enough money in your bank account; you will continue to invest in the training of your franchisees, ensuring the reputation of your brand and concept continues to grow
This is a slightly amended version of an article written by Stefan Kazakis, business strategist and author of From Deadwood to Diamonds. It has been shortened to make it suitable for web publishing.