Should I franchise my business?

Should I franchise my business?

Dealing firstly with whether it is possible to franchise your business.

If your business:

  • was only established in recent years,
  • has not been tested over time in a range of economic conditions,
  • is not a respected and recognizable brand in your local area,
  • does not utilize  operational documentation relating to the processes employed in that business,
  • is not strongly supported by employed managers who are fans of the business,
  • does not utilize a patent or other assets that other potential business owners would value and
  • does not produce a healthy profit after factoring in the franchisors anticipated administration and promotions costs

then you are probably not ready to franchise.

The ideal kind of business is one that ticks each of the boxes above.  The best franchise systems have at their heart, an intellectual property asset, such as a patent or a  “perceived asset” such as,  secret herbs and spices that, other business owners are not able to replicate, unless they buy that asset (and your assistance).   This quality is not essential but it makes the marketing and management of the franchise system much easier.

The characteristics above  are achievable for almost any business.  Over time, with planning, almost any business owner can work towards remodeling their business so that it exhibits these characteristic.

It is certainly no waste of time to get a business ready to franchise even if one then decides, not to proceed. The result of this preparation will almost always be an improved business.

The second stage of the decision making process brings into question whether franchising is the correct vehicle to grow a business.   If  your business is the kind of business that is ready to be franchised then it should also be true that there are other options available to you in order to achieve growth and franchising may be one of many.

One downside of franchising is that you and your business will become governed by more red tape and your time may be consumed by franchisees.  Indeed the business of franchising is about managing franchisees.

The rules surrounding the operation of a franchise system are all about creating transparency and fairness between the parties.  The code of conduct requires a franchisor to be transparent.   For instance you will need to update a disclosure document once a year.

Franchising will involve working with other business owners.  Let’s not forget that each franchisee is a business owner, not an employee.  Unless the system is built to assist and promote the success of the franchisees as a whole then the system will ultimately not achieve great success.   Think of franchisees as being midway between employees and partners, they are a little of each. ( Of course legally, they are neither.)  The franchisor cannot always have its own way, as decisions must be genuinely in the interests of the franchisees as a whole however,  commonly each individual franchisee will not benefit equally.  This is the balancing act of a franchisor and it is often a source of tension.  Franchisors who make decisions solely to benefit the franchisor, rather than the franchise system as a whole, will find that the system never reaches its full potential.

The best marketing tool for a franchisor and a franchise system is happy and successful franchisees.  This is particularly important in the early stages of the franchise system.  The franchisor will be handsomely rewarded for achieving this.

Franchsing will ironically take you away from your business.  No longer will you be the manager of a business, you will be the manager of a franchise system. You will be transported to a new environment where instead of operating a business you will:

  • manage relationships,
  • mentor and guide franchisees,
  • balance competing interests and mediate differences of opinion,
  • promote to franchisees, new concepts and improvements,
  • select new sites,
  • implement marketing strategies
  • record and enhance communications within the group
  • broker deals for the benefit of franchisees
  • mediate disputes
  • recruit new franchisees
  • manage legal issues
  • design and manage systems designed to record and diarise everything.
Can you image yourself in this world?  Is it appealing?  Are you prepared to sacrifice some control in order to have franchisees help you build the system.  You will require high levels of empathy and sometimes a thick skin.
Your suitability to the job may be the deciding factor, even more than,  the issue of  whether your business is ready.
If  this job description does not appeal, are you able to involve someone who can take on these roles.  Do you have the resources?
The role of franchisor is usually not a role that can be successfully fulfilled by one person acting alone.  If you want to franchise your business you will need the right people on the bus,  if the journey is to be completed successfully.  If your business is ready but you are not, then perhaps a partner is needed.

RIBA Business Lawyers

Strength Through Knowledge

Franchising, Leasing, Acquisitions

Head office:  34 Duporth Avenue, Maroochydore, Sunshine Coast, Queensland.

Maroochydore:  07  54791488

Brisbane:  31032115

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