More and more businesses are quite rightly considering the opportunities and benefits offered by franchising when planning their future development. Indeed, any business which operates through branches should at least look at franchising as one of the potential strategies for growth.
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There are a number of financial aspects which need to be addressed by a prospective franchisor when formulating a development plan and I propose to look at three key areas.
Of all the issues that arise for both would-be and existing franchisors none come higher up the scale than franchisee recruitment. If you are a potential franchisor you will have much work to do before placing your first advertisements and we shall explain the elements you need to consider.
One of the more emotive aspects of any franchisor/franchisee relationship is that of the franchise fees. The setting of fees, both initial and ongoing, is very much a balancing act to ensure that both the franchisor and the franchisee achieve the rewards they deserve for their respective contributions to the business.
The preparation of the operating manual is the least exciting part of launching a business-format franchise, but it is nevertheless vital to the success of the system. This is the one document that enables each franchisee to replicate the system in every detail, and provides the franchisor with the closest it can get.
Whatever type of franchise a franchisor is granting – development rights, regional/ master franchising rights, or the rights to operate a single unit – it faces the common problem of resolving the difficulty of dealing with the different comfort thresholds of its franchisees.
Certain words can strike fear into the hearts of the bravest. For some, it’s “dentist”, for others, it’s “year-end results”, and for some, it’s “I do”.
From the point of the inception of a franchise, the objective of the franchisor is to build its network. The key focus is on franchisee recruitment and their training, launch and development because each recruit brings with it a tranche of new money, increased network sales, increased management services fee revenue and brand presence.