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Franchising: the easy option?

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1. Could you be a franchisor? Franchising your business means changing what you do. For example, you stop running your shop or office and become responsible for managing, promoting and developing the network. As Adrian Woolford, managing director at Nevada Bob’s, the leading franchisor of golf stores explains: “Rather than doing, you become a teacher who educates the franchisees how to operate the franchise format.” The fundamental nature of this change in role cannot be underestimated and would-be franchisors should consider carefully whether they really want to make it.

2. Is your business capable of being franchised? It needs to be a relatively simple operation with a proven track record and preferably a well-developed and protected brand that can be easily replicated and translated into a system which, in turn, can be taught to and deployed by franchisees who may have little or no prior experience. The more complex the business, the harder it will be to find and retain suitable franchisees.

3. Do the numbers stack up? The replicated businesses must be capable of being viable, stand-alone operations which produce sufficient, regular profits for franchisees. The franchisees must also be able to sustain the level of revenue you need to collect to support them and leave you with a profit. Your own cashflows will have to be modelled and stress-tested carefully to ensure that you have struck the right balance between initial set-up fees and ongoing payments such as royalties and any contributions to central marketing funds.

4. Don’t rush: Franchising can be a way to grow a business quickly but, to be sustainable over anything other than the short term, the development of a network must be based on sound planning and a proper understanding of what you, as franchisor, will be expected to deliver and when. For example, Adrian Woolford works on the basis that a new franchisee will probably ask 90 per cent of the questions it will ever raise in the first 18 to 24 months of the life of a franchise. Demands such as this need to be costed and factored into your business plan to  make sure that franchises do not fail as a result.

5. Prepare for take-off: Before you commit to shifting to a franchisor’s role, run a pilot site/operation to make sure your format really can be operated by others applying your system. Learn from this and modify your plans and forecasts accordingly. The experience gained from a pilot should also help you to refine the operations manual before it goes into wider circulation.

6. Be prepared to live your brand: Finally, be prepared to engender loyalty, enthusiasm, the desire to succeed and do all you can to build your franchisees’ profits. Their success is your success and it will only help to sustain and grow your network.

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Simon Walsh is a solicitor at SA Law. Contact him on 01727 7980092 or at simon.walsh@salaw.com The author thanks Adrian Woolford of Nevada Bob’s for his assistance with this article.

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