Franchising is a middle-aged concept very well suited in the modern-day globalized world as well. Although, the purpose of the ‘franchise’ back then was to maintain law and assess taxes which was given to the church’s high officials. Not beating around the bush, franchising, even though ancient ideation has found its place in the forward times, is being used only as a term for supporting the growth of businesses from a constricted entity to a chain of stores. Well, since you are reading this article, you have been pondering upon the idea of franchising, ‘How To franchise my Business’, ‘How to grow my business as a franchise’, and similar questions.
Before anything, let’s understand that Franchising is a business setup where a company(franchisor) gives rights or licenses to an individual or a group(franchisee) to sell its products or services in a specific area. This happens when the franchisee pays franchisee fees and agrees to pay the royalty fee.
However tedious franchising your business might be, it pours in rewards. A small business when decides to franchise the business, the growth is never static. The US Census Bureau has speculated and compiled data about American businesses since 2007. Franchising makes up 10.5% of the US economy. After assessing 4.3 million establishments in 295 industries, the census revealed that America has 453,326 franchisees or franchisor-owned businesses.
From drafting a Financial Disclosure Document (FDD) to figuring out what paint should represent your brand, turning a business into a franchise requires an eye for detail. Both, the franchisor as well as the franchisees are at a gain:
- In a franchise business setup, franchisees run the franchise locations but in accordance with the operations manual. Since the franchisor’s business system, business knowledge and experience are accessible to the franchisee, the franchisee’s learning curve is shortened that comes with starting a business.
- By licensing the business system and pledging support to franchisees, franchisors grab the perfect opportunity to expand into areas they may have had difficulty expanding to without additional money or manpower.
Here are some tips for the Franchise New-bees who are having sleepless nights thinking ‘How to franchise my business’:
- Know, Observe and Analyse. For the franchisees, the business setup might be a new venture altogether. On the other hand, franchisors or business owners are affluent with the company’s constituents by pieces. Franchisees will not have the freedom to improvise and need to be provided with the operation manual which has to be scripted by the owners. To do this the owners might need to look at the business from a franchisee’s perspective. Knowing the business in and out just puts the franchisor at an advantage and stronger hold when the business is up and about to be franchised.
- Become Legally Fluent. Owning a business, in the first place, needs to meet a lot of obligations legally. Adding on top of that, the varied laws and legalities involved in opening a business are contrasting to that of franchising. The task becomes even more daunting when the company goes inter-state. Not all states have the same law in regard to franchising. Many states charge a franchising fee along with the taxation from the revenue, while some have ruled out the franchising fee payment. State legislations define the structure of a franchise in a particular state in the country. The International Franchise Association (IFA) is a formidable source when it comes to legal issues proctoring franchise businesses. The IFA systematizes all information on franchises and provides valuable resources and aid to businesses looking for becoming franchises. The association publishes public reports on the legalities involved in franchising.
- Project growth. ‘While growth is appealing, scaling at a reasonable rate is recommended’, as said by the experienced folks in the industry. For the business owners looking to convert their business into franchises, the new business model might mean adding a handful of new outlets and for some, it might be flourishing in the international market as well. This is, for most a deciding factor for businesses. Having a vision guides the business to project growth, and soar high.
- Pay attention to the franchisees. When a franchisee joins a franchise, the brand image, the brand value, and everything associated with the brand are circumstantially handed over to the franchisee as well. Careful consideration of the inevitable aspects such as:
a. just because the franchisee shows interest in opening an outlet, doesnt mean the franchisee will prove to be a valuable addition to the business,
b. franchisees’ core values and perspectives should be in line with the brand visions,
c. franchisees should commit to the cause of the brand and aspire to grow with the company.
Even after offering franchises, the business owners should decide specifically on the limits of the franchisee involvement, Although the business will be the franchisees to run (hiring, training, marketing, etc), with specially drawn terms and conditions so that the brand’s identity is preserved.
5. Set the right expectations, Support your franchisees. A franchisee, typically might not come from a business background or hold a strong hold on the business concepts. Although its already agreed upon in a contract, it is paramount to extend support to the franchisees. The ultimate goal is to gain profits, irrespective of the fact that you are a business owner/ franchisor or a franchisee. This indicates constant communication from both ends.
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