I want my business to grow - should I franchise it?
The UK franchise industry is in genuinely rude health. It generates over £15bn in revenue and employs more than 620,000 people. There are in excess of 44,000 franchised outlets and 97% of them are making money. Maybe you should think about franchising your business… and maybe you shouldn’t. Let’s take a closer look.
What can franchising help you achieve? Short answer is growth. Franchising can be a great way to grow your business relatively quickly and without as much capital expenditure as traditional expansion i.e. buying new sites and employing great managers and teams.
Of course, to achieve growth you’ll need people to buy into your franchise concept, and to achieve long-term success, you need to have a great franchise concept. So how do you know what you’ve got?
Is your business successful? If you want to franchise it, it has to be. If you can’t make a success of your great product or service then why assume someone else will? You need to prove that your business works, that it can be replicated in a different location and that your business systems and procedures can be learned by someone else. If what you’ve got is a great idea for a franchise, then go and prove it works – you can’t franchise an idea.
So, let’s assume you have a great business. What is making it successful? This is an essential question to answer if you are to consider its scalability and ease of replication. For example, if the only reason people queue round the block to visit your sandwich shop is because your manager is a former pop star, then you need to consider how a franchised outlet would fare without the celebrity? If you have a jellied eel shack in Southend that turns over £10k a week, can you reasonably assume that a franchisee would have the same results in Bradford?
Another more personal thing to consider, is the impact you have on your business. Are you the driving force, are you the crowd drawing personality, is it your specialist knowledge and close affinity with your loyal customers that makes your business so successful? There are two primary impacts to consider here – can a franchisee be expected to replicate ‘you’ and how will your business survive now that you have stepped back in order to run a franchise? Do you in fact want to stop doing what you love? It’s amazing the number of people who don’t consider that aspect until it’s too late – you won’t simply carry on as normal while your business becomes a franchise, your role changes dramatically from independent business owner to franchisor.
The list of things to consider really does go on and on.
Is your business profitable enough to present an attractive opportunity to a potential franchise owner? People are investing in your model, not buying a job – they won’t put tens of thousands into something unless it’s going to give them a healthy return.
Is your business highly technical requiring knowledge held by relatively few people?
What kind of work/life balance can a franchisee expect? Be wary of selling your franchise on unrealistic promises – you need franchisees who are going to throw themselves into building a thriving business, not play golf 5 times a week.
What is the ‘hook’ in your business? There will come a time when your franchisees ask themselves what they still need you for – make sure they have a reason – if you plan to rely on contractual obligation then you’ve already lost them.
How strong is your brand? Will it allow your franchisees to open more doors than if they start on their own?
How competitive is your market?
Is/can your business be protected?
Does your product or service have a decent lifespan or are you capitalising on a trend or fad?
The fact you’ve just read this article means you are open to taking advice; this is so important, you should get as much of it as possible. If you are looking for an experienced consultant who can help you with everything from carrying out a feasibility study to developing a strategy to launch your franchise, then you should visit the British Franchise Associaion website or give us a call. If you want to just take early advice from your solicitor or bank, make sure they have in-depth franchise knowledge and experience – again the bfa can help direct you.
Don’t be put off by the potential pitfalls, just make sure you build a team around you who can help you avoid them. Get it right, and the benefits of franchising can be spectacular.