How to set up a franchise operation
Just because you run a sound, profitable business, doesn't mean
you can franchise it. Being sound and profitable helps, but having
a broad geographical appeal is important, as is franchising a
business that is relatively easy and inexpensive to run. And, of
course, the business needs to be easily duplicated. But even if you
can tick a box for all these points, that's when the hard work
starts. You need to do your research, prepare a business plan,
protect the intellectual property aspects of the business and set
up a structure to handle the franchised operation.
- Research and planning
- The legals
- Structure
Research and planning
If you think your business can be franchised, you will need to
come up with a business plan and make sure you've done your
research. While McDonald's burgers and Domino's pizzas are popular
the world over, that doesn't mean your niche tractor engine repair
business will be also. Ask yourself if your products and services
are competitive and distinctive enough to be franchised. Is there a
wider demand? But don't just ask your mates, do the research. It's
probably wise to test the franchise potential with a pilot scheme
at more than one location.
- Be meticulous in your research
The legals
When operating a franchise - or any business with intellectual
property or distinctive designs and logos - it's sensible to get it
registered with the right authorities, usually the trademark and
patent offices. Then it's time to contact a solicitor who can help
you draw up a comprehensive franchise contract setting out the
obligations of each party, including how the fees, mark-ups on
supplies and any other payments from the franchisee are to be
calculated. These obligations should be made clear at the outset of
any agreement with a franchisee.
- Make sure you register any logos or trademarks
- Get a solicitor to draw up a contract
Structure
When it comes to taking on franchisors, you will need to hand
over a certain amount of information, rather than simply patting
them on the back and saying good luck. Generally, this will consist
of a comprehensive operations manual and training programme for
franchisees, along with information about the expected standards of
customer behaviour, for example. In some instances, such as
McDonald's, it will be much more (it operates a nine-month training
programme and offers 20-year franchise contracts). For most, the
information will also include marketing and sales literature. Plus
as franchisor, you must be in a position to handle the franchisee,
and deal with their questions, concerns and problems.
- Ensure you pass all relevant information on to franchisors
- Offer guidance to your franchisors
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