Establishing a Franchise

Have you thought long and hard before starting a franchise? Many people often rush into the franchise without taking the time to really consider the responsibilities that are involved. It is a good idea to seek out accounting and legal advice from the start to ensure that you are properly advised on all matters. You should also know what questions to ask your franchisor so that you know what is required of you.

It is important to be as prepared as possible as starting up a new franchise requires a lot of responsibility from the get-go. There also needs to be clear and consistent communications between you and the franchisor. You need to form a strong and healthy relationship with your franchisor from the start as the relationship will grow and will require continuous compromise (giving a little, taking a little).

The reality is that franchising is hard work and it will take time to get the business established. There is also the possibility that the franchisor might change which means that you will need to adapt to a new management style. In this instance, make sure you keep on top of, and accept the new changes.

Franchising Checklist

You should be able to answer ‘yes’ to all of the questions below before franchising your business.

  • 1. Are you willing to accept full responsibility?

    Franchising involves taking full responsibility for other people’s money, efforts and aspirations as well as your own.

  • 2. Does your concept have staying power?

    Your franchise needs staying power to be able to endure as a business and be replicable by franchisees.

  • 3. Is your concept unique?

    Your concept needs to be unique and have a competitive edge within the marketplace. The unique aspect extends to the marketing package, such as name, brand, image, as well as your methods of operation

  • 4. Is your concept capable of relication and being successfully operated by others?

    One of the key concepts in franchising is replicability. You need to ensure that your system of operation and business methods (including new ideas) are capable of being replicated and successfully operated by the franchisees.

  • 5. Can your concept make a profit for all involved?

    A successful franchise needs to generate sufficient returns for the franchisees to pay them for their efforts, achieve a reasonable return on their capital, have the ability to repay any loans and pay the franchisor for their services. Your franchise must also be able to generate sufficient returns to you, the franchisor, for your labours, ongoing services, and generate a reasonable profit.

  • 6. Do you have enough capital to kick-start the franchise?

Your capital will need to be able to cover:

• marketing and advertising;
• system development and training;
• machinery and infrastructure;
• development of an operations manual;
• the normal costs involved in setting up a business (registration of a business name, administrative costs and employment of staff).

  • 7. Do you know how to obtain expert advice?

    You should seek the expert advice such as lawyers, consultants, and accountants experienced in franchising when you’re considering franchising.

  • 8. Are you good at choosing and teaching your franchisees?

    It is possible that the franchisees you select have no previous experience in running a business. It is important to choose the right people and ensure that they are adequately trained.

  • 9. Have you tested your concept before?

    It is an excellent idea to market test your concept by running a successful pilot program. The success of the pilot program is essential to attracting others to your business. At this stage you should also have developed your operations manual.

  • 10. Have you developed a detailed operations manual?

    Your operations manual is a detailed written description of your business system and they way in which it is to be operated. The franchisees will use this as a reference for the work they need to do in operating the franchise.