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How to Franchise your Business

Written by: Nick Strong

Article Overview: Many business owners that have proven their business to be stable and profitable over a considerable period of time are thinking about unit and geographical expansion though out the UK. However, the cost of such development can be too great for most small businesses. Franchising offers a possible route to national expansion at a much reduced cost.

How to Franchise your Business

There are key considerations you should make before starting the Franchise process. You must have:

• A proven business that is profitable and is not fashion or fad dependent. The business concept must be able to stand the test of time.

• An operations manual in place that documents what your business does and how it is operated at every level. This will be the basis of your Franchise operations manual.

• Capital to invest in setting up and developing a Franchise network.

• A distinct and trade marked logo that the company owns.

Initial Research

The British Franchise Association hold regular seminars on what to consider when thinking about Franchising your business. Attendance incurs minimal cost and covers essential Franchise issues.

Business Plan

How much does it cost to set your business up as a franchise?

It is not cheap and not to be taken lightly. However, over 750 businesses are recognised by NatWest and the British Franchise Association (BFA). Therefore many companies have taken this step and are growing their businesses via franchising.

When building your business plan you need to consider the costs of the following:

• Route to funding
• Legal
• Advertising
• Marketing collateral
• Consultancy
• Staffing
• Office space
• Revenue from franchisees


Funding

When you are looking for funding it is advisable to work with one of the main banks that have specialised Franchise departments. Currently in the UK the following banks have specialised franchise departments:

• Nat West
• HSBC
• Lloyds TSB
• Bank of Scotland
• Royal Bank of Scotland

These departments have up to twenty six years of trading and expertise in the Franchise arena. It is advisable to contact these departments directly for advice from one of their experts.

Consultant

Generally speaking there are two types of new Franchise business.

1.Unhappy and frustrated – these are generally those that went to market without the assistance of an accredited British Franchise Association Consultant.

2.Focused and progressive – these new Franchisors have invested in the assistance of an accredited British Franchise Association Consultant.

Engaging the services of an accredited franchise consultant does not come without cost. However, the good consultant is worth their weight in gold as they will help you prepare a route map to market which should help you avoid many costly pitfalls.

Operations manual

One of the first jobs you will tackle with your Franchise consultant is the writing of your operations manual. Your operations manual is called your ‘intellectual property’. This document is in essence the basis of your franchise offer. The ops manual outlines how to set up and successfully replicate your business by a third party. This document is therefore highly valuable and is the key to your Franchisees running successful businesses.

People buy a Franchise so they can go into business with reduced risks of commercial failure. They will rely on the ops manual and the training and support you give them to replicate your successful formula.

This document must be protected as it holds all your secrets – it is the foundation of your franchise proposition.

Legal

Generally speaking there are two types of Franchise contract.

1.Written from a standard template or a general lawyer – usually this is the type of contract that you could drive a bus through and is an accident waiting to happen.

2.Written by a British Franchise Association accredited lawyer – usually this will be a well prepared document that will work in your favour should occasion arise to protect your business, brand and intellectual property.

Again you will not find a specialist Franchise lawyer to be cheap but the benefit of getting your legal documents right from the outset could literally save your business in the future.

Staffing

When considering staffing for Franchise development you need a key member of staff on your team that has proven success at recruiting, training and supporting Franchisees. There are a limited of executive search companies that are accredited by the British Franchise Association. These will probably be the best route to finding your essential team member.

Launch and Advertising

Plan your launch carefully. There are several types of media that you can use to launch and advertise your franchise. These include on line portals such as www.selectyourfranchise.com, daily newspapers such as the Daily Express and several franchise exhibitions run by Venture Marketing.

Recruitment

It takes time to recruit, train and launch a Franchisee into business. It can be anything from a couple of months to a year depending on a number of factors such as funds and finding trading premises. This is especially the case with retail premises. This needs careful consideration when planning your start up cash flow.

On average there will be around two out of every one hundred prospects that will convert into Franchisees. A Franchise lead costs in the region of £30 to generate. Advertising costs to recruit may be in the region of £1500 per Franchisee recruited provided costs and conversion match figures mentioned above.

As previously mentioned people buy a Franchise because they want to be self employed and reduce the risks of commercial failure. A well structured and proven Franchise system offers a way to market through a proven formula. It also adds value and reduces the risk to self employed business owners. Franchisees are therefore not entrepreneurs but rather followers or disciples of a proven system.

Revenue from Franchisees

It takes time for a new Franchisee to generate revenue from their business. The Franchisor’s income from the Franchisee is a percentage of turnover. Therefore you must consider this when planning revenue predictions in your business planning.

Ongoing System Development

So that your Franchise business network can grow and prosper, it is vital that all Franchisees meet their and your expectations. Any information provided through the recruitment and training process should be fulfilled in the Franchisees trading experience. Be careful not to over promise in your recruitment efforts as this will lead to problems in the future.

Taking on Franchisees is a long term two way commitment. Developing a successful Franchise network is like developing a successful marriage. It has promises and expectations involved on both sides. For the relationship to work both sides must give and receive and want to make the relationship work.

Accreditation

It is advisable to investigate how to become accredited by the British Franchise Association (BFA) as soon as possible. Your BFA accredited consultant will help you prepare your Franchise with application to the BFA in mind. The BFA have high entry standards for accreditation. Accreditation is therefore not just for those who can afford it but principally for those that deserve it.

Summary

In closing it can be seen from the last quarter of a century that Franchising can be a successful way of growing a businesses brand, trading locations and profitability. Franchising is not a system that will save an ailing business. It is a way of replicating a successful business for the benefit of Franchise owner and Franchisee. There is no quick route to successful Franchising. It is a long process with potential financial benefits for the medium and long term for both franchisor and franchisees alike.

Article by Nick Strong MD Select Your Franchise UK Ltd

Select Your Franchise UK Ltd offer advertising and lead generation for Franchisors via www.selectyourfranchise.com . Select Your Franchise offers Franchisee recruitment training to UK and overseas Franchisors wishing to trade in the UK.

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