Karen Keylock | Manager | National Retail Services | Nedbank | mail me |
So, your idea has taken off and is wildly successful. Next step is to franchise it and make some serious money, right?
Not so fast: while the franchising model can be applied to almost any industry, not all businesses are ‘franchisable’.
The feasibility test
The first step to building a successful franchise is having a concept that has been growing well as a freestanding business, and being able to understand how the business operates and what is at the root of its success.
Essentially, several critical success factors need to be examined, which can be done by closely evaluating your responses to these 12 questions.
This assessment helps you better understand the proposed business model to be replicated. It allows you to gather the information needed to review your business. The aim is to develop a strong franchise value proposition. This includes the product and service range, pricing and competitiveness. It also covers the skills and systems needed to run the business. Marketing, branding and supplier relationships are key considerations. In addition, staff training programmes and financial models are crucial elements.
Develop an expansion plan
Assuming the information you’ve gathered is positive from a franchise feasibility perspective, the next step is crucial. Specifically, you would need to formulate a practical expansion action plan for structuring, developing and replicating the business.
This expansion plan should, for example, detail the ideal expansion format and the value proposition for the franchisee. Additionally, it must outline the franchise fee structure, necessary documentation and the franchisee’s support and training needs. Furthermore, include a geographical expansion plan, franchise opportunity marketing and a proactive recruitment and selection process. Importantly, define the ideal owner-operator or franchisee profile in the plan.
Notably, deciding who will make an ideal franchisee is an essential step. After all, franchisers make a significant investment in their franchisees and depend on them for growth. Therefore, the franchiser must identify the skills, experience and characteristics essential for success. They should also develop a franchisee profile based on these findings and stick to it. For added precision, tools like psychometric assessments can evaluate whether potential franchisees meet the required profile.
During this stage, operating at least one unit at arm’s length is highly recommended. This unit could be run as a joint venture with a trusted staff member to test the concept. Such an approach helps identify problems and eases the franchiser into their new business model. Moreover, retaining this company-owned outlet generates income to fund ongoing operations. It also provides an ideal base for training and testing new products or services.
Implement your expansion plan
During the implementation phase, the most important steps include training key management and support staff. Additionally, the development of franchise documentation must be done in conjunction with industry experts. These documents include the franchise disclosure document, the franchise agreement and the franchise operations manual.
Moreover, this phase entails marketing the franchise opportunity and recruiting suitable franchisees. It also involves identifying training courses for franchisees and franchise support staff. Importantly, monitoring the progress of franchise development is essential during this stage.
Seek bespoke financial support for your franchise system
A crucial component of this stage involves presenting the concept to commercial banks or funders for support. From our perspective, creating a client value proposition is essential to attract preferential banking solutions for franchisees.
This value proposition should include lending guidelines catering to various scenarios, such as financing new stores and multi-site opportunities. Additionally, it must address the refurbishment of stores and pre-arranging transactional pricing at group benefit rates. Furthermore, offering value-added solutions tailored to the business is an important part of this process.
Once these phases are completed and successfully implemented, your business is ready for expansion. At this point, you are officially a franchiser!
Admittedly, the process outlined above can be daunting and may take up to a year to complete. However, investing time and energy upfront significantly improves your franchise business’s chances of success.
Related FAQs: Franchising feasibility and assessment
Q: What is a franchising feasibility and assessment?
A: Franchise feasibility and assessment refers to the process of assessing whether your business model is suitable for franchising. It involves evaluating the potential for expansion, understanding the market, and determining if the franchise may be a viable option for business growth.
Q: How can I franchise my business?
A: To franchise your business, you need to develop a comprehensive franchising strategy, which includes creating a franchise program, conducting a feasibility study and establishing training and support systems for franchisees. Consulting with franchise consultants can provide valuable insights throughout this process.
Q: What are the benefits of franchising?
A: The benefits of franchising include rapid business growth, reduced financial risk, a broader customer base and the ability to leverage the efforts of franchisees. Additionally, franchising can enhance your competitive advantage in new markets.
Q: What should I consider when developing a franchising feasibility and assessment?
A: When developing a franchise, consider your business model, the training program for franchisees, franchise fees and royalties, and the overall support structure. It’s essential to assess the feasibility of your franchise system to ensure it aligns with your expansion strategy.
Q: How do I assess the feasibility of franchising my business?
A: To assess the feasibility of franchising your business, conduct a franchise feasibility analysis that includes evaluating your current business performance, market conditions and potential franchisee interest. Engaging franchise consultants can help you gather and analyse relevant data.
Q: What role do franchise consultants play in franchising?
A: Franchise consultants assist business owners in navigating the franchising process. They provide expertise in developing a franchise program, conducting feasibility studies and creating training and support systems for franchisees, which can significantly enhance the chances of franchise success.
Q: What is a franchisee and what role do they play?
A: A franchisee is a business owner who purchases the rights to operate a franchise from the franchisor. They play a crucial role in executing the franchising strategy by adhering to the established business model and contributing to the brand’s overall success.
Q: How can I ensure a competitive advantage with my franchise?
A: To ensure a competitive advantage with your franchise, focus on creating a unique value proposition, providing excellent training and support for franchisees, and continuously innovating your business practices. This can help differentiate your franchise in the marketplace and attract more franchisees.
Q: What are some alternatives to franchising?
A: Alternatives to franchising may include opening company-owned locations, licensing your brand or partnering with other businesses. Each option has its own set of benefits and challenges, and it’s essential to evaluate which method aligns best with your expansion goals.
Q: How can I expand my business using franchising?
A: You can expand your business using franchising by developing a scalable franchise system that allows others to operate under your brand. This involves creating a detailed franchising strategy, providing extensive training and support and effectively marketing the franchise opportunity to potential franchisees in new markets.
