How to franchise your business

Are- you planning on expanding your business and looking for the most effective way to do so? Then franchising could well be the answer.

At present more than 850 businesses in the UK are using franchising as a route to business growth and in 2009 contributed £11.8 billion to the UK economy, according to the NatWest/British Franchise Association (bfa) UK Franchise Survey.

The definition of franchising has been confused over the years by the various licences, business opportunities and pyramid schemes that have co-opted the term.

As a result, the franchise industry proper has, therefore, adopted the term 'Business Format Franchising' to differentiate properly structured franchises from other opportunities on the market.

"Business format franchising is the granting of a licence by one person (the franchisor) to another (the franchise owner/franchisee), which entitles the franchise owner to trade under the trade mark/trade name of the franchisor and to make use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis." - The bfa

But how do you got about launching your business as a franchise opportunity? To do this, you must first understand whether your business is suitable to become a business franchise. Does your business operate a proven concept that can be replicated nationwide?

Speak to the experts

Developing a franchise is a challenging undertaking and only advisable armed with a wealth of practical experience and the best Franchise Consultant that you can find. You must engage those with a proven experience and the best track record of success.

Accessing the franchise wisdom of more experienced parties is your insurance against having to retread these steps further down the line - a costly and difficult endeavour if franchise owners are already signed up, especially if the franchise agreement needs amending.

"Overall success in franchising is not based on a small number of factors, but a combination of many criteria - applied at the right time, in the right way and in the right place," emphasises FDS Southern Franchise Consultant Gordon Patterson.

How much it will cost

This will differ from industry to industry - a pilot scheme involving the opening of a new retail franchise opportunity will cost much more than starting a cleaning franchise.

Masterminding a professional infrastructure for franchising a business normally requires around £50,000, estimates Professor Roy Seaman CFE, Managing Director of Franchise Development Services, whose business has been specialising in franchise consultancy for more than 28 years.

During the early days of developing a franchise system, rather than a net flow of money coming into your business, as a new franchisor you need to expect a net flow outwards. Support staff need to be paid and new franchise owners recruited and trained. On average, franchise owners cost between £5,000 to £10,000 each to recruit and will require substantial support while still generating little business and paying little by way of fees.

Initial investments

Your first investment will be commissioning an Evaluation Analysis and Outline Franchise Development Business Plan from an experienced Franchise Consultant. In many ways this is the most important investment in the process of setting up a franchise. The study's twin goals are to analyse your business and its market, and identify what modifications may be required to ensure its smooth Franchise Development Work Programme.

With your franchise package in place, now comes the time to set it down in print. There are a number of UK lawyers specialising in franchising, many of whom are affiliated members of the bfa who will be able to produce the appropriate Franchise Agreements.

Additional documents must also be designed and developed, including franchise owner manuals; marketing and promotional materials and intellectual property rights need to be secured, before the final document, The Franchise Prospectus, is produced.

Recruiting the right people

Once the franchise package is in place; the process of building a franchise network can begin. It is at this point that having the correct strategy is absolutely crucial to ensure your business gets off on the right footing, as Tony Urwin, FDS North Regional Director states: "Franchisors must understand the importance of a well-managed recruitment programme.†Carried out correctly this, establishes the basis of a high quality and well-motivated franchise network.†Done wrong, it can sow the seeds of a franchisor's undoing."

Note:

Franchise Development Services Ltd was established in 1981 and has helped more than 1,000 companies to successfully franchise their business nationwide and worldwide.

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