Having
considered the above advantages and disadvantages, you need to look at the question
whether your business is suitable for development? Most types of businesses are
suitable for franchising, however there are some businesses which may not lend
themselves to franchising and some that may be impractical.
Businesses
with poor gross profit margins usually make poor candidates, unless the franchisee
has the opportunity to quickly build up a substantial turnover. There have to
be sufficient margins in the business, in terms of money and time invested, to
make it worthwhile to both the franchisor and franchisee.
The
franchisor has to have sufficient income from their franchisees to pay for the
service they have contracted to provide in the franchisee agreement and, at the
end of the day, to make a profit commensurate with their investment and effort.
The franchisees have to trade sufficiently well to pay their franchisor for the
services they provide and also make their profits.
All
this has to be achieved within the constraints of the market place. Prices cannot
be arbitrarily raised to create sufficiently wide margins. The governing factor
is that franchisees must remain competitive in the marketplace.
Your
easy to follow business system should be capable of being taught to complete strangers
with no prior experience. The more skill, training or personal ability required
by the franchisees - even is such general term as marketing and sales - the more
difficult it becomes to recruit the right people. On the other and, the business
should not be so simple as to be copied, or one with an end product that the public
can buy universally and cheaply.
The
business should be one in which the franchisor is capable of exercising control
over the activities of the franchisees and the way they operate their outlets.
Most importantly, the franchisor must be in a position to audit turnover levels
and, consequently, the payment of fees. There must be adequate controls to avoid
under-declaration of receipts by franchisees.
The
fee of the franchise is also important. The lower the start-up costs, the easier
it should be to sell franchises. It really goes without saying that there are
more people who can raise £25,000 than £100,000 to start a business.
Summary
The
best businesses to franchise are those with a good trading record, strong branding
and marketing programs, and an established business system which can be encapsulated
in an operation manual and easily passed on in a short time to newcomers. Also,
if it is to be aimed at the largest sector of the franchisee market, it should
not require too high and investment.
I
still want to proceed with Franchising my business>>
