By Andrew Skinner - 18 Feb 2020
People with successful businesses often consider a range
of options for expanding their operation. Franchising is becoming
an increasingly popular option for well-established businesses
operating in a local market, but wishing to expand regionally or
nationally.
What is franchising?
In franchising, the owner of a business retains all of the
intellectual property and know-how in their business system and
authorises independent companies (known as franchisees) to operate
the business system in a particular territory. There are
three basic features:
- ownership by the franchisor of a name and distinctive business
system;
- the grant of a licence to franchisees permitting the use of
such name and business system, together with controls on how to
operate the business;
- payment by the franchisee of a royalty fee on income earned to
the franchisor for the rights to use the franchise system.
Am I ready?
Franchising provides an opportunity for the owner of a business
to:
- expand the brand and customer base without having to provide
all of the capital and personnel for that expansion
- move away from the day to day operational running of the
business and move more into a system development and mentoring
role.
In deciding whether to franchise your business you need to
consider a number of factors such as:
- is the business to be franchised well established and
profitable? Franchisees will expect the business system to be
robust and profitable and will ask questions of the franchisor as
to the financial strength of the business;
- does your business have a unique brand or way of operating that
differentiates the business from the other competitors? Franchisees
will be attracted to businesses that have a strong brand in the
market and a good reputation for delivering results;
- is your method of operating easily taught to others and able to
be captured in a business manual? The power of franchising is the
ability to replicate the same business system and provide the same
service to customers. During the start-up phase for franchising, a
lot of time will be spent documenting the system method and the way
of doing business.
Next Steps
If you are interested in exploring whether franchising is the
right option for your business then please contact Andrew Skinner
to discuss.