Is your business suitable for franchising?

The variety of businesses involved in the franchise industry is astounding. While the most obvious examples are the high street variety, such as fashion retail stores, fast food restaurants and print/copy centres, there is a huge number of service concepts offering franchises too, such as estate & lettings agencies, business coaches, automotive aftercare providers, snack machine distributors and travel agencies.

The Franchisor shall:

• have operated a business concept with success for a reasonable time and in at least one pilot unit before starting its franchise network;
• be the owner, or have legal rights to the use, of its network's tradename, trade mark or other distinguishing identification;

- The European Franchise Federation's European Code of Ethics for Franchising

If you are considering franchising your business, the core offering must be in place before a professional franchise consultant can assist you in building a franchise package.

Proven Concept

Prospective business owners are mainly attracted to franchising because it offers access to an established business model which has been properly trialled and proven by the franchisor. If you are coming to the franchise market with a business idea that hasn't chalked up a year of operations and satisfactory financial performance, then you are effectively peddling a pipedream that has little value to a franchise seeker. Your pilot operation must have charted out a launch strategy; performed to replicable growth standards; ironed out teething problems; put in place systems and procedures; and generated a positive cash flow.

Registered intellectual property

Your company's brand identity and corporate image must be registered in order for it to have any value in the franchise package provided to the franchisee. As your network grows to national status, building brand credibility and positive customer goodwill, the importance of your brand protection will grow as local competitors challenge your franchisees.

With these strong foundations built, you may be tempted to embark upon company-funded expansion in order to retain 100 per cent equity in the operation and prevent income streams from being diverted to franchise owners. This is missing the point. Instead of pulling together the capital investment required to open a second company-owned outlet or office through business loans or from your business's own cash flow, you are allowing the franchisee to provide this capital and take on the risk, while still receiving a fair reward for the value of the intellectual property and concept that has been developed.