Factors to consider before committing to Franchise Development

It is 2021 and growing business value through Franchising is today a very widely practised method for business expansion. The benefits of leveraging Franchise as a vehicle of growth have been very well publicised.   

Speak of Franchising and brands like McDonald’s, KFC, Pizza Hut, Kumon Math, and Anytime fitness come to mind. These are brands that have leveraged the franchise model incredibly successfully to grow their brands from one country to become present globally.  

The world of opportunity appears to each business owner when they consider the possibility of building a global franchise business.  

Franchising has been the preferred method of growth for decades but it is important to understand that it is not a sure win formula for everyone and every business.

Many times, the most successful franchise systems are not the ones with the best ideas, products, or services; they are the ones with the best execution and commitment to building a franchise system. 

How to know if your business is ready for Franchise Development? 

  1. Your business has a high franchise-ability score.  

If you are not sure about your business’s franchise readiness, you can use this Is my Business franchise-able assessment to access a quick and simple way to find out if your business is ready for franchising.  

Depending on the sector your business resides in, you can also check out your Sector’s franchise-ability score in this guide. 

  1. Your business has a strong and profitable foundation.

Here we focus on 2 main areas: Setting up the franchise system and franchise network, and the other is developing a strong quality franchise operations management. 

Setting up the franchise system and franchise network 

You or your company’s business goals must align with franchising. This entails gearing all the necessary franchise-related core capabilities and plans of the company towards ensuring successful implementation. This means investing in resources, time, and money in establishing a franchise organization responsible for on-boarding, training, and supporting franchisees.  

Developing a strong quality franchise operations management 

At the very core of franchising is the replication of the success of the business model. Franchise Development is all about success and taking the business, brand, systems, and know-how that have allowed you to make your business a success and duplicating these systems for your franchisee partners. Your business must be successful and must have a track record of consistent results.  

Potential franchisees will not invest in a franchise to lose money. Franchisors must ensure that the business will consistently provide franchisees with a lucrative opportunity after they pay the franchisor the required franchise fees. A business that has not achieved financial success and grasped its own success factors should not be looking at franchising as it would most likely be perpetuating its own weaknesses and search for the secret of success. 

various consumer brands
  1. Your business has a distinctive brand image, positioning, and promise

Your business must own Intellectual Property (IP). Ownership of IP can be through the registration of a trademark, patent, copyright as well as the rights to your own domain names. This intellectual property is the intangible asset to a company and the cornerstone to successful franchise marketing and licensing. It gives you exclusive rights to the use of your IP to the exclusion of others. This is a key factor that will allow you to differentiate your brand from others.    

  1. Your Business is Profitable

Ensure that you are making healthy profits before you embark on the franchise development process. This is because your franchisee’s business will be based on replicating your business model, and a key part of the relationship is the payment of royalties from the revenue to the franchisor in exchange for the use of the franchisor’s IP and the services rendered.  

If the model is not profitable at the franchisor level, it is also likely the franchisee may not be profitable, making it difficult for the franchisee to have to pay yet an additional level of expenses in the form of royalties to the franchisor.  

  1. Your Business is Replicable

Can your business operations be taught to someone else with relative ease? Are your processes something that franchisees can be trained to successfully deliver the same products or services that have made your business a success?  Can you develop systems to support franchisees and ensure that they maintain consistent levels of quality and customer service?  

  1. Your Business has a scalable supply chain

Supply chain management is critical to the success of a franchise business. Supply chain management has a big impact on the ultimate quality of product or service delivered. It is important that franchisors are able to support franchisees by delivering the necessary products (for example, ingredients and branded packaging for foodservice businesses) and support systems (for example, customer relationship management systems and call centres for service-based businesses) to ensure sustainable growth.  

franchise meeting

Important Factors to consider in Franchise Development 

Are you ready to commit to providing quality franchise operations management?  

Managing a successful franchise is more than just understanding your franchise financials. The financials are what may be important as we initially engage with franchisees but eventually, it is the successful operations of the business unit that makes a successful franchise system. Developing a strong quality Franchise operations management of your network is a must. 

Are you willing to set up the right franchise management team

Franchisors must have employees and engaged experts to provide training, support, advertising, management, employee relations, public relations, and legal advice. Franchisors also must be able to train and support franchisees while trusting others to continue to operate their existing business locations.  

 As your franchise network grows, it will need more and more franchisor support to ensure the training, customer service, and product quality controls are in place. Franchise Operations Managers, training managers, and auditors are key players in your franchise team. Having the right team in place will help you to ensure your franchise is growing in the right direction.  

Are you ready to leverage technology to optimise your Franchise operations management?  

Having one central source of data and management is important in the successful management of a new franchise. A franchise management system can help you ensure effective and systematic franchisee onboarding, training and compliance management. Most importantly, this helps franchise managers get access to useful performance reports that help them manage and guide individual franchisee performance. This reduces the volume of paperwork that franchise managers previously needed to invest in before getting any cohesive and usable data. With the comprehensive implementation of a franchise management system, Franchise managers can focus on franchisee management rather than becoming stuck in the administrative side of collating data.  

Have you set aside sufficient financial resources to ensure that franchising stays as the focus of your franchise growth?  

There are expenses you need to consider both before embarking on franchising and once it is launched.   

Launching and operating a franchising program can be a costly affair. It is important for prospective Franchisors to understand that in the beginning, it is possible to have to invest more than the franchise fees they receive from the franchisees until a significant mass is achieved.   

Becoming a successful franchisor requires capital, strategic planning, a deep and experienced management team, and a consistently financial successful business model that can be reproduced repeatedly. Before taking the step of becoming a franchisor, make sure you have what it takes.  

Launching your franchise system is not the finish line – it is just the start.  

Upfront Investments:  

  • Consultant fees to assist with Franchise Development.
  • Trademark fees. It is very important to ensure you own your trademark in the territories you intend to grow your business in. As the costs of trademarking globally are very high, it is advisable to decide which are key countries of immediate interest and start trademarking in those countries as a start.  
  • Legal Costs. This would include franchise agreement drafting as well as some trademark assignment costs.  
  • Marketing your franchise. It is important to reserve a budget to market your Franchise. It makes sense to invest in a digital campaign to promote your franchise. If franchise exhibitions resume, it also makes sense to give the franchise some visibility.  
  • Developing a franchise management system. This is the latest in franchise management best practices. What used to be impossible in the past is now an everyday reality. When well implemented, this system pays for itself as it will increase performance standards, franchisee engagement, and overall compliance, thereby improving the overall performance and profitability of the franchise system.
opening a franchise

Franchising is the most effective way for business unit models to grow exponentially 

The advantages of franchises are numerous and thousands of brands have grown and become household brands across the world. Every entrepreneur secretly wishes they can be the next Ray Croc and that their brand can become the next Mcdonald’s to hit our markets.

To grow your brand in that direction, it is important to invest in building a very strong Franchise Strategy, both in terms of franchise system development and quality franchise operations management. These two parts must come together as one, there is no great franchise system if there is no franchise quality to sustain the growth of the brand. 

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