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How to Franchise a Business with Strong Foundations?

March 21, 2016 by Callum Floyd

How to franchise a Business with Strong Foundations? A franchise system needs to be designed and built responsibly, that is how to franchise a business to succeed. That responsibility starts with designing an appropriate franchise structure based on a successful operating business that has been proven in the field over a period of time.

Franchising can be a highly successful method of operating a business which can expand quickly and yield a large competitive advantage.

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How to Franchise by Building Strong Foundations

It should be based on the principle of win-win. In other words, both the franchisor and franchisees have to do well from the system. Too many of New Zealand franchise systems have been home-built by DIY amateur business people who, through lack of experience and knowledge, have not got it right. Too often systems are developed with fatal flaws for the franchisor and/or the franchisees. This will inevitably impact badly on both the franchisor and franchisees.

A would-be franchisor not only owes it to himself and his/her family, but he/she also owes it to the franchisees to get it right and not bring them down with him.

The responsibly designed and built franchise system, is how to franchise an established business properly, and provides value to its franchisees teaching them how to operate the business, get customers, keep customers, and grow their business profitably.

When planning a franchise business, set the objective that you wish to achieve both for the immediate future and the long term.

Be sure that you have a sufficiently proven prototype to give you the base facts and elements on which to secure your franchise assumptions on.

That prototype needs to have demonstrated proven market demand for your products/services and yielded sufficient profits to indicate that a franchise structure can work for both parties.

Also be aware of where your product/service sits in the industry lifecycle. Is it in the pioneer, competitive, or declining sector? This will have a big bearing on how your structure will be designed.

And above all, remember that franchising is about relationships. Crucial challenges include managing uniformity (standardisation), levels of adaptation within territories, and implementing systemwide changes for systemwide benefits. Franchisees are in a way the franchisor\’s business partners and need to be \”sold\” on new initiatives rather than like employees who can be \”told\” what to do.

What are the benefits of franchising a Business?

The benefits that a company can get if it is franchised properly are very significant.

  • Correct franchising can very quickly increase market share
  • Correct franchising can build customer loyalty
  • Correct franchising can achieve high market penetration at a lower capital cost
  • Correct franchising can obtain operating efficiencies and economies of scale
  • Correct franchising replaces the need for employees with motivated owner-operators – better results
  • Correct franchising can improve competitive position – reduce administration costs

For those business people who wish to grow their company and gain a competitive advantage a franchise format should be one of the first methods that they should investigate. Contact our team to learn more.

This article was written by Win Robinson.

Related Franchise Video

Category: Blog

About Callum Floyd

Our Managing Director, Dr Callum Floyd, served on the FANZ board in various roles for nearly a decade, and Franchize Consultants continues its long-term support of FANZ in any way it can. We’re strong believers in the value of FANZ’s firm codes of practice and ethics, and for this reason recommend our franchisor businesses consider FANZ membership.

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