We have had several clients who wish to franchise their businesses. It is understood that they want to grow but, not only that, some also see the franchise system as a way to have income without much effort, nothing further from reality. Franchising a business requires an internal methodology and infrastructure in addition to, of course, having sufficient capital not only for the sale and promotion of their food concept, but also to support the growth and operational support of its potential franchisees.
Sadly we have found a common denominator in most cases; they do not have a simple business plan much less their strategic franchise plan. Several factors must be considered to be able to launch a franchise system.
The concept is profitable and can be duplicated, is it franchisable?
Is there sufficient capitalization to launch and sustain a profitable franchise system?
Does the company have an experienced and trained team of franchise development and operation?
To begin with, it is important to remember that to have a franchise program, it must have two fundamental parts:
The strategic plan of the concept to promote franchises, and the informative, contractual, and operational documentation.
Strategic Franchise Plan; It is the phase where the franchise model is determined, the economic viability of the project is analyzed and the rights and obligations of the parties are established. As well as the global vision of the project: Description, Operations, marketing, legal and human resources area, competence, structure, expansion system, etc...
Documentation; This is where the development of the FDD, the Franchise Agreement, and the Operating Manuals are included.
The true pillar on which the success of the franchise is based in the "Strategic Project", no company should consider entering to franchising without a project that validates it, well, in fact, there are many companies and individuals that offer franchises only based on their website but that does not have financial or operational experience and support, well, they are just companies or individuals that merely seek to make money quickly through others.
Thinking of entering the franchise system but don't know if your business is franchisable? It is extremely important to know the fundamental aspects that must be considered in deciding a franchise project.
There are a series of questions that every business owner should ask himself to know more about his own business and thus have a more complete idea before starting to offer franchises.
We must recognize that certainly, there’re great advantages that are obtained when franchising a business, some advantages can be:
Opportunity and vision
Great market penetration
The exploitation of economies of scale
Faster brand recognition
Have you ever wondered if your concept is tested and ready? Let review some characteristics that the business should have if you are thinking of franchising.
Permanence in time
It must be a novel concept, transferable and adaptable to other markets and that it is not just a fad. Entrepreneurs may be attracted to fashion businesses, which look like gold mines, however, the benefit of a franchise is really to acquire a business model that has proven successful over a certain period. Who knows how to deal with different internal and external crises.
Differentiated corporate identity and image. Exclusive ways in the marketing of products and services. It does not matter if they are their own or not. The important thing is to provide differentiation.
Easy transmission of Know-How and easy reproduction by franchisees. This means having complete infrastructure to be able to transmit, teach, train, guide, supervise the franchises wherever they are.
Control by the franchisor to review sales, quality levels, and compliance with contractual agreements. Franchisees must follow corporate guidelines at all times.
Franchises are an operating system for all franchisees, it is going in the same direction under the same standards, continuing with the same business model and achieving the same mission.
You should know that as an independent business owner, the business owner focuses on business performance, increasing sales, development and personnel issues, cost control, etc., but as a franchisee, in addition to everything above, you must follow the franchisor's instructions at all times.
Market extension and development possibilities.
This is focused on where I am going to extend my franchise system. The potential market has the minimum number to sustain a business, do I have potential customers, how will I develop my franchise sales, individual franchisees, regional, or master franchises?
The numbers should report sufficient margins for the parties and shared benefits.
It is not that the franchise only manages to have the resources to pay the royalties to the franchisees.
The mutual benefit is that it is a situation in which both parties win. When a franchise closes or is put up for sale, the effect is always negative for the franchisor, even when there are penalization clauses for transfer cases. What affects one unit affects the entire system.
The growth of a franchise-based company is not only to open a new "franchise tab" on the corporate website and start offering and granting franchises.
Developing a realistic and updated growth plan covering each area of the company is the first step! It is extremely important to have a growth plan with a strong, solid, and sustainable base. Many honest companies offer franchises, and that know they offer a business concept that has proven to be successful during a certain period of "years". Many good brands grant their concept to a franchisee, but they have and implement rigorous selection and training standards for their new franchisees and that also have a realistic expansion program, thus ensuring that they will have good and better franchisees, but you should remember that overly aggressive expansion has killed many good chains, this is particularly true for the concepts of fast-casual dining.
Do you have a strategic & expansion development plan?
Is there a demand to justify such an optimistic and aggressive expansion?
Is your system ready to grow?
Do you have the financial and human elements to grow?
It is daunting to see how companies with one or two stores offer franchises without really any experience in franchising and infrastructure.