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Turning you business into a franchise

Written by: Colin Mackie

Article Overview: There are very essential questions that you must ask yourself before entering into the fanchise sector. They are not quetions that you would expect your solicitor or account to ask, but they need to be asked as you are about to become intrinsicaly involved with a number of people who will trust and follow you. Morals and ehtics are not words that are used often in business and are often concidered as 'wimpish'or of no consequence in the world of business. In franchising they are essential. If you do not give them the attention that they deserve, you will not remain a Franchisor for long. We all know that bad news travels at twice the speed of light and good news travels on horse-back. A disatified and unhappy Franchisee will tell the world and your dreams of wealth in franchising will tumble like the walls of Jerico.

Turning you business into a franchise

Turning Your Business Into A Franchise


If you have an existing business that you believe meets the criteria of a Franchisable concept, there are a significant number of steps you need to take before you visit your (or our) solicitor.

Stand back from your business and look at it as a consumer would. Is the name, the logo, the colours and the slogan recognisable and indicative of the products or services you provide? The last person to give you an unbiased opinion is yourself, then your partner. Your kids can be pretty blunt and can also let you know how the younger generation view your image but it is hard to get an honest opinion if you ask the questions yourself. Most people will tell you what they think you want to hear rather than what you need to hear.

Is everything systemised because you will need to systemise every aspect of your business's operation. You can pay to get this done, but it is expensive and it is a job that you should do yourself. It will help you to find areas that need to be attended to, changed or scrapped all together. Get a recorder and tape everything you do from morning till night. Give this to someone to type up and then go though it yourself before getting it set out into your manual.

Have you secured and protected you IP? Your IP is what you are going to franchise and unless this is secure, you are leaving yourself in a very vulnerable position. Are you planning to take your system over seas at some time in the future? Have you checked your IP in these target locations? Trade marks and copyright can be expensive but not securing them from day one, can be even more costly in the future.

What infrastructure do you have in place? How many Franchisees can you install with your existing support group? How many Franchisees can you support with one Franchisee Support Manager? What skills are required for this role? Have you an employee who can fill this role competently and honestly? What level of support are you planning and have you worked out the cost of suppling this? These questions will help you to do some forward budgeting and costing.

Have you done a personal appraisal on your own personal skills as a Franchisor? Remember, the skills you need as a successful Franchisor can be decidedly different from those required as a small business owner. List your personal skill sets and areas where you may be lacking competency and decide which of those that you do lack that can be fixed up with training. The others you need to clearly define and plan to employ those who can perform these duties professionally. Remember also that the worst judge of you is yourself. Your opinion is probably less valid than other people's as yours will be tainted by your own self talk whether it is either positive or negative.

Your legal structure for a Franchise system also needs to be a little more complex than a normal small operation. As soon as you launch your franchise you have some potentially very valuable Intellectual Property that needs to be safeguarded. Your financial assets also need to be protected, just in case the worst happens. Whether the best legal or financial structure is a Unit Trust, Discretionary Trust, Family Trust, Pty Ltd or any one or a combination of a few all need to be looked at as the best structure for your enterprise. Your accountant (if he is a good one) should be able to help in this area.

Most people might now call on their solicitor. I feel strongly that this is not the best move. Solicitors are absolutely essential in producing the legal documents, but most will not really have a clue as to how a business operates from the psychological viewpoint of the Franchisor, the Franchisees or the public. A business is not a legal entity. It is a living and breathing entity that contains a myriad of reflections of the mind of the developer. It is people and dreams, and goals, and hopes. These do not follow the rules of law. The rule of law will be essential at the end of the structuring process but not at the beginning or middle. A business mentor is required; someone with business experience, a bone fide marketing expert (not necessarily someone with a degree).

Every business is dependant upon marketing. How to understand and interpret the market that the product or service is to be placed is essential in getting your message out to the end user. The profile of the prospective user of the product or service needs to be unambiguous. Your competitors place in the market in relation to market share, price points, market acceptance, brand awareness and loyalty all need to be examined in detail. Perceived strengths and weaknesses in both your offering and that of your competitors should be understood. An exit strategy should be discussed before you begin. Your distinctive USP needs to be clarified and expanded and then explained from the users point of view. Plus all of the other essentials of a comprehensive marketing plan should be addressed.

The overall franchise systems must be clear. Financial projections and assumptions for your own benefit, with a Worst Case Scenario overview as a major component, need to be compiled and scrutinised. How do you determine the price of the franchise? What is to be included in the package? What level of training is required and what subjects need to be addressed? The cost of training, equipment, legal costs, advertising costs, initial marketing program, Franchisee sourcing costs and Franchisee selection costs need to be determined.

Have you profiled the Perfect Franchisee? If so, throw it out because you must also believe in the tooth fairy. There is no such thing as a Perfect Franchisee. The Franchisee who buys into a brand new system must be a very different type of person to the person who comes in as number 5 and 10 and 100. It takes a higher degree of guts to join a new system, and these braver people may well be a major problem in the future. However, if you wait to find the Franchisee who will be great in two years time you will have to wait two years to find him and he still will not come on board as he needs the security of a tested system.

Once you have determined your target Franchisee you need to target the most efficient and effective manner to attract them to you. There can, and will be, costs involved and these can be very high. So many systems do not budget appropriately for this and fail before they even get started. They have one or two people who indicated that they would buy a franchise but this was before they knew what it cost and what the opportunity and restrictions were. If you are depending on this happening to fund your further expansion, think again.

The above is not a fully comprehensive list but it is a good starting place. It should open your mind and help you to formulate a plan or encourage you to seek proper help. Find a mentor, offer them a share in your enterprise rather than money; remember that an 80% share of a huge and profitable enterprise is much more valuable than a 100% of a small back-yard business. Get a business partner on board who can give you honest and unbiased opinions, ideas and systems; someone who brings to the boardroom table expertise that would otherwise be highly expensive or unavailable.

Good luck and remember that you will only get out what you put in; honesty, trustworthiness, compassion and empathy are the cornerstones of a real winning business.

Related Articles
  Franchise Trends for 2011
  The Advantages of Owning a Franchise
  Franchising as a way to Expand an already Successful Business
  Why buy an existing business?
  Franchising with all its Success

Article Tags: colours, franchise, franchisee support, franchisees, honest opinion, infrastructure, job, recognisable, slogan, solicitor, support group, target locations, vulnerable position, younger generation



Related Forum Posts
What are the reasons why you would NOT buy a franchise? - Even though I'm a strong believer that franchising as a great business model, I would personally not buy a franchise. My main reason for not buying a franchise is that you're not your own boss. You take all the risks without really being in control of your business. To me that's the biggest drawback. What about you? What are the reasons why you would NOT buy a franchise?
Re: What is the Best Franchise? - As a franchise owner the things that I look for in a prospective franchise is: 1- A proven track record. Too many franchises try and branch out long before they have perfected their product, don't become a guinea pig for them to figure out what works and what doesnt. 2- Support. A good franchise should have great communication with it's franchisee's and be available to meet it's franchisees needs. Youre only contact with them shouldn't be when you have a problem. Good franchises involves it's franchisees in building it's business. 3- A Great System. McDonald's doesn't exactly make a good hamburger but they have an excellent system of conducting business. The real value in a franchise is the system, not necessarily the product. There are many other factors in deciding on a franchise but many of those are personal to you and your situation. The best thing to do is to conduct as much research as possible and speak with every current franchisee you can and get a feel for the franchise. garyshouldis.com
NEED SOME CLARIFICATIONS - My mother and I own a fantastic birthday party business. We have always thought it would be a good franchise for anyone wanting to work out of the home. How would we get our business to franchise? The parties include a costumed character, a birthday card art project, interactive story times, and themed games. We are based in Buffalo, NY . It is very successful here, and we want to get it out to the world, while making a couple bucks. How do we franchise this?
Franchising vs. Licensing - While Ken's definition of a franchise is correct, I disagree with his statement that a franchise and a license can mean the same thing. A franchise [u:2pwsjr5r]contains [/u:2pwsjr5r]two licenses. A trademark license (the name and fee) and a business opportunity license (a system and a fee). The combination of those licenses in the same relationship creates a franchise. If you want to license a business opportunity, you need to tell your licensee that they [u:2pwsjr5r]cannot use your trademark[/u:2pwsjr5r]. If this is your growth strategy, you will neglect to build a brand. While that is not always important, it often is. We tell our clients not to think of whether a particular business relationship will be, but instead to structure the relationship the way it makes sense from a business perspective. If it then turns out to be a franchise or a license, then so be it. The difference in cost between the two forms of expansion, done properly, is not very signficant. If you are interested in learning more, I would be happy to send you a free copy of a one hour seminar on "How to Franchise a Business." It goes into some detail on this topic. You can write to the email below or get it on my website.
Hello I am a franchise expert - Hello, I recruit franchise owners for successful franchise concepts based in the USA. Many of my franchises are looking to expand north to Canada in all major centers. I enjoy networking and answering questions about franchising. If anyone is interested in the franchise world or looking to buy a franchise then contact me. I have a wealth of information and like to help. Thanks for your time. Michael Somer


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