Developing a business for franchising

The best businesses in terms of franchising are simple ones. Franchisees have to be trained to run the business successfully. The more complex it is, the more difficult this becomes. Likewise the simpler the set up of the business in terms of equipment, fixtures and fittings the better. The franchisor must therefore spend time and money simplifying control, reducing administration work and trying to create a more or less idiot proof system which franchisees can quickly learn and easily operate and which the franchisor can easily support.

It must be borne in mind that ordinary small businesses are so busy battling with day to day survival that they can rarely engage in strategic long term planning or research new products properly. The franchisors role involves carrying on exactly those activities and so any franchised business should be developed with this in mind.

There should be a clear and identifiable demand for the product or service - or at least potential demand which the franchisor's marketing campaign can develop and exploit.

The business should be properly branded so as to be more readily marketable. A distinctive easy to remember name with a bright crop image is essential. If it is a business with retail premises they should be designed and laid out so as to maximise impact and consider friendliness with an appropriate colour scheme and "trade dress" which will encourage the public to recognise the concept "at a glance" from the colour scheme and designs used. If the business is a van based one then the same applies to the vehicles which should be properly liveried and the franchisees uniformly dressed so as to promote a distinct "corporate image" for the franchise.

When applying and creating a business for franchising clearly the prospective franchisor must have regard to potential franchisees. Will the business be able to attract franchisees with access to sufficient levels of funding to enable them to invest in the franchise and allow them sufficient working capital? Will the franchise appear an attractive investment compared to other opportunities - both franchised and non-franchised? Will there be a sufficient number of potential franchisees with access to the appropriate level of funding with the necessary skill set that will enable them to be trained as a franchisee?

Like all successful businesses a franchise must be profitable - not only for the franchisor, but also for the franchisee. The franchised outlets must produce sufficient turnover to allow the franchisee to make a reasonable net profit after the franchise fee/service fee and any marketing contribution have been stripped out, which represents a decent return for his labours.

Moreover, the franchisee should be able to ultimately realise a capital profit on his investment in the business.

Clearly the franchisor must also be able to make a reasonable profit out of the business. This should be based ongoing fees - that is to say the ongoing success of the franchisees and not one off upfront fees.

The franchisor will establish certain criteria which will assist franchisees to identify suitable locations for their new businesses. These will often concentrate upon factors such as, if it is location based. Should it be a primary, secondary or tertiary location? What local demographics are appropriate? What volume of foot full is necessary? What general environment (e.g. neighbouring shops, schools, cinemas, museum's etc.) are desirable? What size of premises are best? and so on. If it is a mobile franchise such criteria may include, the optimum size of vehicle, the number of telephone lines and so on.

These are all to be tested in the pilot operation.