Franchise a Business with the Right Steps

Franchise a business while achieving excellent results requires planning. In fact, anyone getting involved in franchising needs to do it in the right order. No matter if you are franchisor or a franchisee there is a prior stage. And the prior stage comprises a series of activities, that help pave the way for positive outcomes, and reduce the likelihood and size of challenges along the way.

 

For franchisees in-depth Due Diligence of the franchise and themselves is critical prior to signing agreements. The Franchise Association of New Zealand’s free Online Pre-Entry Programme for Prospective Franchisees, along with supplementary research (e.g. calling existing franchisees), and, experienced legal and business advice should be considered mandatory, I believe. No franchisee should enter franchising without such a stage comprising these important activities. Yet many do, and may wish they didn’t. This stage will clearly help.

Franchise a Business with the Right Steps

For franchisors, a similarly phased approach is needed. Prior to franchising, and writing and signing a Franchise Agreement, a dedicated planning, assessment and preparation stage is needed. Broadly, such a phase is needed to help structure the franchise system properly, assess likely returns to the franchisor and franchisees, establish a proper franchising infrastructure and train the franchisor (how to be a successful franchisor). Yet sadly some franchisors / licensors elect to skip this planning phase, and some advisors are happy to go along with it – thereby increasing the chances franchising expectations will not be met for the now franchisor and their new associated franchisees invested.

For companies considering franchising a dedicated and comprehensive planning stage, led by a competent consultant specialising in franchising, is needed prior to the drafting of a franchise agreement.  At Franchize Consultants we understand the impact not using a specialist franchise consultant, and in the right order, can have. This is based on my own research (published internationally) going back 20 years, Franchize Consultants’ 26 years in operation, and our observations of franchise company backgrounds and performance.

In our experience, the following are typical shortcomings when vital stages are missed:

1. The company doesn’t know if their franchise royalty, other income streams and fees are structured appropriately, or even sufficient for their particular circumstances.
2. The company is likely to have problems with roles and responsibilities, like what they do as a franchisor, what franchisees expect the company to do and what the company expects franchisees to do.
3. The company has a Franchise Agreement that is not optimal for their strategy.
4. The company lacks a basic solid Franchise Manual, training systems and tools to help franchisors and franchisees understand and perform their roles – and protect the system.
5. The company does not understand or deliver key franchisor management processes.

Franchising is exciting in concept but it needs to be entered correctly in order to get great results, and avoid disastrous outcomes, from franchisor and franchisee perspectives alike.

This is particularly true in business today, where nothing comes easy. Competition is typically tougher, margins tighter, and consumer have more choice. Now more than ever, there is less margin for error and good planning, structure and management prior to franchising is critical.

By franchising, an established high performing company can achieve great results. But there are many logical steps along the way to franchise a business that need to be planned and executed in order to achieve great results – for franchisors and franchisees – alike.