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Franchising Your Business & What To Look For In Franchisees

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Franchising your business can help you to achieve scale much quicker than you would otherwise be able to. It also means that you wont have to raise as much debt and equity financing as if your business decided to go it alone. But, even if youre sure that franchising is right for your business, how can you be sure that the franchisees that you choose are right for your business? This article takes a look at how you can screen your franchisees to ensure they dont damage your brand and jeopardise your growth. The article focuses on franchising where the franchisee is a person, rather than a company, and they intend to take an active management position.

Creditworthiness

Its important to ensure that your franchisee is creditworthy for two reasons. Firstly, it shows their willingness to fulfil their obligations historically, and could be a sign of how trustworthy they are. Secondly, you can use this information to check how likely it is that they are to be able to afford on-going payments they make towards to your business. You can also find out how much assets they have, and the degree of leverage they will be using to purchase the franchise. The more leverage, the more likely things could go wrong. However, just because things arent looking great historically, and theyre low on assets, doesnt mean they cant contribute. Its about getting the mix right between prudence and flexibility.

Track-record

Although you are looking for a business partner, and not an employee, many of the rules are the same. If someone has a history of high job turnover, poor attendance, and long periods of unemployment then they are probably not the optimum candidate for a franchise opportunity. When youre franchising your business, and youre looking to get the best people in place, these are factors you should definitely consider. Another factor is their relevant experience for the job they will do. If youre franchising a plumbing business, for example, then if the person has experience and qualifications in this area then that could work well. Management experience is something thats not always necessary, but it can be important too.

Depending on the type of franchise youre selling, it will usually be worthwhile doing a criminal background check, and other similar checks.

Passion & Drive

Its important that your franchisees are both passionate and driven. This will mean that they will drive higher revenues, youll get higher management fees, and theyll be happier at their job. It also probably means they will contribute more towards your brand.

Most businesses know they want people like this, but finding them can be another matter altogether. Ensuring that you are disciplined in who you are willing to work with is the first step, and the second is encouraging franchisees yourself. The franchising manager should maintain a good dialogue with franchisees, and provide them with the support they need to remain highly determined to be successful. Ultimately, you and the franchisee both play an equally important role in their success.

is franchising your business worth it

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Franchising your business possesses fantastic rewards, from a greater return on investment to risk reducing and holding of capital. But prior to you begin the process of franchising your business, you must 1st ascertain if your concept and operating system is franchisable.
Primary tenants of franchisability include:
Uniqueness. Your business must possess adequate differentiation from other franchises either in terms of products and services, marketing, smaller investment cost, or target market.

Straightforward operations. Your system and business model had better be relatively easy for a new franchisee to learn in a small time frame.
Strength of management. Even the most successful company will waver without a strong management team in position.

Adaptability and requirement. Your concept had better adjust easily to numerous locations and in that respect should be sufficient demand for your products or services.
ROI. A franchised business should bear sufficient profit after paying fees and royalties to earn an adequate return on investment.

Credibility. A franchisor must be credible to prospective franchisees.
If your business passes this litmus test, you will need a franchise plan and a business plan. A franchise plan is not the same as a business plan. Essentially, the franchise plan is a plan for franchising your business, detailing all of the steps you will take, as well as the franchise fee. The business plan outlines your overall business strategy over the next five years.

Next you will need an operations manual and training programs for your franchisees. In order to legally sell franchises, you must draft a franchise agreement and a Franchise Disclosure Document (FDD) and file with the appropriate state and national authorities. A franchise attorney can help you create these documents and meet the legislative requirements.

One of the main reasons franchising is attractive to franchisees is that they are buying the rights to use an established trademark and/or brand name. If you have not already done so, make sure that your intellectual property rights are available and register them.

In order to sell franchises, you will need a marketing plan. Marketing efforts could include a sales campaign, such as direct mail initiatives, franchise sales brochure and collateral, a sales videotape, a Web site with franchising information, paid placement on franchise opportunity Web sites, listing with a franchise brokerage firm, and trade show participation.

As you can tell, having the thought to franchise your business and actually franchising your business are two completely different things, they are worlds apart.
It takes a lot of hard work to get your business franchised. in the long run it is worth it so the hard work put in to make it work would be highly worth it.
There are plenty of websites out their that will help with all aspect of franchising if you needed assistance.

Franchising In A Nutshell

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if you are thinking about starting up in business under your own steam it is critical that you choose an option that is related to your interests and skillset. You must also be sure that the market of interest is constant and not a trend.

Alot of people looking at starting up in business for the first time are looking closely at franchising. We can look at why this is and how to decide if a franchise option is a good option for you?

So lets look at who and who is not best suited to run a franchise business.

Business format franchise profile definition

A business format franchise will usually comprise of the following components, It should be:-

A business system that has been proven
Can be replicated
Has national and local support in place
Ruled by a contract
Posesses branding and recognition that contribute value as intellectual property that is owned and protected

What makes a good franchisee?

The franchisor is the owner of the brand. The local operative is called the franchise owner or franchisee. Each thriving franchise owner needs to have at least the following attributes for the franchise they are running to be successful. They will be:-

Able to Have the ability to replicate the proven franchise system
Be enthused about the franchise system
Have the ability to serve their customers passionately
Have a good manner when handling people
Be secure in the knowledge that their family has been behind them from day one
Have the where with all to come up with finance in order to purchase and operate their chosen franchise

Bad franchisee profile

Not everyone is cut out for being a franchisee. Considered carefully is franchising is really what you want to do if you:-

Are not sure that you have your familys support
Don’t have enough funds to set up your chosen franchise
Are not prepared to follow other peoples ideas
Have difficulties organising your schedule and prioritise tasks

Philippines Franchising Business

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Over the past years, franchising has become one of the fastest routes to business success in the Philippines. Both local and foreign brand names find themselves in a tight competition to gain a sizeable margin of the Philippine market. The franchising industry has also contributed significantly to the growth of the economy in the Philippines.

Franchising can be viewed from two perspectives: the franchisee and the franchisor. For the franchisee, a franchise is like a business wrapped in a package, with all the goods, services and operating manual in it, ready for roll out and operation. Counting on the elements of a well-established brand name and a tried-and-tested system of running the business, the franchisee receives many benefits, including access to information and technology that comes with the business, training and tech support of all aspects of the system, and the fact that a name that has already built its reputation for a number of years is a lesser risk than building a name from ground zero.

Franchising, from the franchisor’s point of view, has a different meaning. It presents an opportunity for business expansion; something that would have been difficult is done by them. Franchising for them is convincing the buyer (the franchisee), that their business is a good buy and worth investing in. Having a franchisee ran an outlet of their business means they can extend their products and services to more people in a wider coverage.

Buying and selling a franchise business in the Philippines is governed by the Philippine Franchise Association. This body gives guidelines and policies to regulate and promote fair practices on franchise activities by both local and foreign brand names. It is also tasked at providing assistance to franchise holders and buyers like financial programs, seminar workshops and information dissemination.

So much does a franchise cost in the Philippines? That would depend on a number of things, like the type of product or services offered, the size and location of the intended franchise outlet, layout / design of the outlet, beginning stock inventory, facilities and equipments needed along with its operating and maintenance cost, insurance and other pertinent expenses. Other equally important matters to consider include the franchise fee, training programs that the franchisor would be providing, royalty fees, feasibility studies to be conducted, marketing campaigns and advertisements.

Franchise for food cart businesses are generally cheaper to acquire, and prospective buyers can start owning these for as low as fifteen thousand pesos to an average cost of one hundred thousand pesos, depending on the type of food being sold and the size of the cart. A water refilling systems cost around two hundred to five hundred thousand pesos to operate. Other bigger franchise, like gasoline stations and food manufacturing and retail business, can go as high as five to ten million pesos, but the returns are well worth the investment.

Franchising – The Licensing Of Trademarks And Methods Of Doing Business

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Franchise is a method of doing business by licensing trademarks. A recurring royalty fee being the prime source of income, the advent of franchise business dates back to the 1850s. The earliest example being the bars of New South Wales, the agreements between these bars and the breweries can be considered the foundation for modern franchise businesses. Further examples of early franchises include the telegraph system (operated by various railroad companies but controlled by Western Union) and exclusive agreements between automobile manufacturers and local dealers.

The term franchise holds multiple definitions. Encompassing a plethora of varied business relationships, franchises sometimes do not follow their legal definition per se, for example, an appliance maintenance franchise. In this case, though the after sales services are supposed to be done by the manufacturer, they grant the license for maintenance to some other party, thinning down further the dividing line between outsourcing and franchising.

A franchise agreement is the first step between the willing parties; the agreement binds the parties together through contractual provisions, strengthening further the arrangements of selling one’s own products or services through another person holding the license. The agreement also specifies the area of operation under the franchise holder, though the franchise provider usually denies a complete and exclusive control of the franchise holder over that particular territory. Franchise in the US abides by the jurisdiction granted by the state and federal laws though there is no federal registry of franchising or any federal filing requirements for information. However, franchise holders are required to have a Uniform Franchise Offering Circular (as per the Federal Trade Commission rules); it helps in disclosing the business transactions and purchases that remain involved. As of now, the Financial Times declared that if sales by US franchise businesses were translated into national product, they would qualify as the 7th largest economy in the world.

Franchise-based restaurants opened gates for the wave of franchise businesses since the 1930s. First came the traditional sit-down restaurants (Howard Johnson’s) and then McDonalds in the 1950s rendering United States a franchise business dominion to the point where proprietorship business has become the exception rather than the rule.

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