6 key considerations when turning your business into a franchise

6 KEY CONSIDERATIONS WHEN TURNING YOUR BUSINESS INTO A FRANCHISE

If your business has established a strong brand and reputation, franchising can be a great opportunity to scale and grow the business across multiple locations. The NatWest bfa 2020 annual survey reported that here are more than 900 franchisor brands operating in the UK, with just over 44,000 franchisee outlets between them. The sector provides jobs for 621,000 people, and it turns over £15bn per year. In short, franchises are an important part of the UK economy.

However, there are key issues to consider before committing to a franchise business model.

1. Feasibility

 The franchise business model is different to an ordinary trading business. A franchise is dependent on the strength of the brand, reputation and transferable and teachable skills, process, systems and expertise. Therefore, it is essential to check whether your business is “franchiseable”.

As with all new businesses the initial step is to prepare a business plan to record the reasons for franchising, consideration of and confirmation that the business is suitable for a franchise business model and a breakdown of the proposed resource and management structure.

Normally, it will be wise to undertake a “pilot” operation to develop and refine the franchise business. For example, you could operate one or more company-owned outlets which are operated as if they were franchised outlets. Alternatively, you could look to attract pilot franchisees by offering preferential terms.

In addition to seeking advice from a solicitor, accountant and your bankers, you may wish to appoint a specialist franchise consultant to assist with a feasibility study.

2. Cost

Franchising your business will require considerable investment in preparing legal documents, operations manuals, marketing materials and recruitment.

The main benefits you will be offering to prospective franchisees include the provision of training programmes and ongoing business support and know-how. It is important to ensure that you budget for the upfront and ongoing costs of running a franchise model.

3. How much time will you need to put in?

Running a business, and starting a franchise in particular, often requires long hours which go far beyond the traditional 9-5. You need to be prepared to put in the time and effort without reaping much reward, at least initially!

Considerable time will be spent in making sure you attract the right franchisees and control how they run the business from the outset, in line with your franchise manual.

4. Speak to other franchisors

Speaking with others who have been through the experience of setting up a franchise will help flag up the potential pitfalls to look out for. If possible, you should speak with both successful and unsuccessful franchisors. Ask them which of their business decisions led to their success and their failures. Find out what they would do differently if they started all over again.

5. Developing a business strategy to provide the right support

Setting goals on how to expand the business to provide a stable franchise model is important when attracting potential franchisees. The business needs to have a credible basis and must provide high standards of support to franchisees to be successful.

The British Franchise Association (BFA) is an organisation which aims to promote ethical franchising practice in the UK and help the industry develop credibility, influence and favourable circumstances for growth. You should definitely look to the BFA for as much guidance as possible.

6. What is your end goal?

What are you hoping to get out of running a franchise business model? Is your business strategy short term or long term? This will affect the type of franchise you choose to run, and how you run it. A clear message about your business goals will result in attracting the right franchisees, and they will have a vested interest in the success of the overall brand and reputation and, consequently, the achievement of your end goal.

For more information, please call us on 020 4571 8633 or email us at hello@birdilaw.com. Alternatively, please take a moment to complete our free enquiry form.

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