We’ve been approached recently by a number of businesses looking to franchise their operations.
There are a number of reasons for this, not least of which is spreading the risk of expansion. Using other methods of expansion, such as acquisition or opening new outlets, means the business itself carries the risk of growth.
With franchising the risk is transferred, to a certain extent, to the franchisee. For example, the new outlet is opened using the franchisee’s resources, rather than the franchisor’s.
So, it’s an attractive proposition for expansion.
I have to say that most types of operation could be franchised, we very rarely get asked whether a business should be franchised.
So what are the golden tests of whether a business should be franchised?
I reckon there are four tests.
The first is this: why is the business being franchised in the first place? If it’s just because the owners think it’s a quick and easy way of growing the business, then franchising is not an option. Franchising transfers risk, but it is not a shortcut to growth.
A lot of effort and some considerable expense has to be dedicated to the operation to make it into a proper franchise.
The second is the leap needed by the business owners. When a business is franchised the product is now franchising, not whatever it was before. This changes the decision making processes of the business owners… or, at least it should do if franchising is the right route.
Thirdly, the operation, or at least elements of it must be systemisable – that is whatever the product or service is can be taught to anyone… or at least, if there is a specialist element to the service, that this is handled by the franchisor and the franchisees job is to sell that service.
Finally, the business must have trademarked everything it needs to – systems, processes, logo, brand, intellectual property and the like.
If these four things are in place, it’s likely that the business could well become an excellent franchise operation.