A step-by-step guide on how to franchise a business

As an entrepreneur, one of the best ways to rapidly expand your business is through franchising. That said, the franchising process can be extremely complicated and incredibly risky should you not execute it properly. This franchising process can be better understood as consisting of the following three steps:

  • Step 1 – Assessment: Check the business’s suitability for franchising. For example, if your business is heavily reliant on a niche talent, it will difficult to replicate its results in multiple locations under the management of different franchisees. Therefore, as a general note, any business that requires or is characterised by a broad personality (easily replicable) tend to be better suited to the franchising model.
  • Step 2 – Replication: Build additional branches before officially launching your franchise. This is because, often, running multiple branches acts as a good candidate for a franchise.
  • Step 3 – Market: Identify what your business’s potential market is and the competitive advantages the business may have. Take the time to determine what makes your business successful as this will form part of the strategy you will use to navigate the process of franchising going forward.

The franchise should begin to take shape once you have firmly established the three basics listed above. That being said, there still exists considerable planning to be done and decisions to be made regarding your franchise. For example, you will still have to decide on the ownership structure, when you will sell the outlets, territorial exclusivity, the fee, how much you require from the franchisee as an unencumbered cash contribution, royalties, marketing, how much you (as the franchisor) will charge for management fees, as well as numerous other issues to be addressed.

Skills

As an entrepreneur, it is also important to determine what skills are required to ensure the franchise meets the necessary requirements and overcomes any challenges it may face. In this regard, lawyers, accountants, and other such advisers occupy significant roles and, in doing so, ensure the long-term growth of a franchise. Included in these advisers are industry specialists who are important to engage with to create detailed operations’ manuals that guarantee that those implementing what is said in the manuals will produce the same result. Should you have a mentor, they may help find and assemble the necessary team of advisers and experts.

Speed

Another crucial factor upon which the success of a franchise is based is speed. Rapid growth is a necessity during the first stages of a franchise, to ensure it reaches a sufficient turnover; that is, turnover that can cover the costs of the launch, and justify any franchise fees and royalties through your company’s branding, marketing, and purchasing clout. While speed or rapid growth is undoubtedly important, a balance needs to be struck between said speed and the characteristics of the franchisees you choose.

Management

As a franchisor, it is important to be selective when choosing franchisees from among the applications you receive. This is in terms of their management experience, business skills and acumen, creditworthiness, enthusiasm, attitude, and personality fit. Franchisees are viewed as ambassadors of your company or brand, therefore a bad ambassador can cause reputational damage especially for a young franchise group.

Location

Arguably as important as selecting the right franchisee is the need to select the correct and most suitable location for each franchise or branch, because an incorrect location can lead to the failure of a branch. Regardless of the skill, experience, and dedication of the franchisee, a bad location can cause a branch to underperform and potentially damage your brand.

Maintenance

As a last note, once your brand has been successfully launched, it needs protecting against people intending to exploit it or do it harm. You therefore need to ensure the brand is adequately maintained by paying attention to the quality of your product, customer service, and how each outlet looks and feels.

Franchising is not an easy process, however, if you manage it correctly, it can be lucrative method of expansion. Managing franchising correctly involves keeping your business’s key differentiators alive and ensuring the product and service quality remains at the standard your consumers expect.

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