If you are running a successful business with opportunities for growth beyond your current outlet, you may want to consider franchising as a method to scale your business.
How to determine if your business could be franchised
There are many factors to consider, including whether you would enjoy the franchisor role, where you guide others to grow their own businesses. These are some of the considerations to keep in mind:
- The business should have a successful track record. Many entrepreneurs have a multitude of ideas, but franchising should be delayed until the business model is proven to have longevity and profitability, despite cyclical changes.
- The brand should be unique and the trademark registered. Franchisees will buy a license to use the brand name and brand collateral, so the brand should have an element of uniqueness and should have trademark protection
- Franchisees should have the potential to earn a return on their investment. The franchisor should provide franchisees with financial projections that demonstrate the potential return on investment
- It must be possible to train franchisees on business operations. The business should be systemised and standardised to the extent that it’s possible to train a person from another industry or background on how to operate a franchise
A potential franchisor must know the legal requirements of establishing a franchise. While there are no compulsory registration requirements, the Competition Act and the Consumer Protection Act apply to franchise arrangements and agreements.
The core business will change
When franchising, the management of the franchise network and relationships with franchisees become the core business of the franchisor. Developing a franchise will most likely require additional infrastructure and resources and the investment of funds into these aspects. While it’s possible to go it alone, potential franchisors should consider obtaining legal and consulting advice on structuring the franchise model and agreement. These experts could save an entrepreneur much money on school fees in the long run.
Article written by Anita at Franchise Fundi, a professional franchise consulting firm. For more information, see www.franchisefundi.co.za