DIY Franchising …. all you need to know
A complete franchise package for next to nothing, save thousands of pounds – sounds great doesn’t it!? In reality, it isn’t.
There are a few ‘consultancy’ companies offering ‘DIY franchising’ meaning that the potential franchisor is provided with franchise document templates and is left to fill in the blanks. With bold claims that this will save time and money; it is a temping proposition, but it is dangerously flawed.
Firstly, it makes the assumption that you have a full understanding of franchising…which really is very unlikely.
Next, one of the main reasons that DIY Franchising doesn’t work is quite simply that one size does not fit all. Every business and individual sector is different and therefore a tailored approach is needed – one error in a generic template could prove to be very costly!
When developing your franchise offering – to avoid costly problems with your franchisees you need to address every aspect of the offer, the support programme, and the legal agreement to make sure that you have an answer to every eventuality that may occur – a generic template cannot provide this. Nor does it give you access to the reality and experience of the franchise sector that a seasoned consultant can.
DIY franchising can lead to:
- Generic ‘copycat’ legal documents, meaning the agreement is not tailored and also that a potential franchisee will possibly compare it with another brand they are considering thus weakening your strength
- Insufficient financial analysis of the business, could lead to you losing money from the off .. or a franchisee not coming on board because the numbers don’t add up, or worse still they come on board then don’t make enough to get by so sue you or go out of business weakening your reputation
- Inaccurately defined territories leading to clashes with franchisees later
- Franchise Manuals that do not reflect the nature and ethics of the business
- Lack of support for franchisees because there is insufficient understanding, leading to unhappy franchisees
- Unhappy franchisees, who tell others and make it hard for you to recruit
- More time and money spent putting the above right!
Why should you use a franchise consultant?
Having invested your time in researching the proposition you may be tempted to go down the ‘DIY route’. However, in doing this you leave yourself open to making the same mistakes as your competitors and risk damaging your business as a result.
Using a franchise consultant can eliminate these problems and take you one step ahead of the competition from the start. It really need not cost a great deal of money because we can tailor our work to mentoring and supporting you when you want to be more hands on.
The first thing your consultant will do is a feasibility study, which, along with his or her experience, will indicate the franchise structure that your company and, possibly more importantly, your management team will be able to work with and develop.
Next the franchise consultant will establish the most suitable structure for your franchise system. Franchises come in many shapes and forms - job franchises, master franchises, regional or area development franchises. All are suited to particular business types and cultures.
A significant challenge to overcome is the delicate balance of profitability that lies between the franchisor and the franchisee. Some franchises operate purely through mark up on products. However, if yours is a service business you will need to determine a management service fee that retains a fair profit for the franchisee and covers the support costs of the franchisor.
Your consultant will look carefully at your trading figures and will calculate projections both for yourself as the franchisor, and for your franchisees. The consultant will help you to make sure that both sides of the partnership will make a healthy profit in line with their investment.
Managing a franchise network requires a certain amount of discipline. It is important that all franchisees receive the same level of support. The most effective way to do this is to create a complete set of support documentation that maps out the business systems clearly and is easy to understand.
Compiling this documentation, plus additional material such as text for your prospectus, then your detailed discovery documents and a briefing document for your franchise lawyer, are all components of the consultant’s work.
In addition, a consultant who is a British Franchise Association Affiliate will develop a bespoke franchising system based on your current business practices that meets the standards of the BFA in terms of profitability, processes and ethical practices. This gives you the edge when recruiting, and also is a must if you plan to be at one of the franchise shows in the future promoting your franchise because the Bfa sets out the criteria for accepting new brands into the show.
Engaging a British Franchise Association affiliated franchise consultant to work with you when setting up your franchise system will guarantee that your franchise network has the best possible start. Don’t be tempted to leave it to chance.
To know more about franchising your business why not go to:
Click here to book your seat at one of our FREE ‘How to Franchise’ Seminars.
Next, take time to see how Lloyds bank and the BFA have worked together to bring you some know-how: http://bfa.trainme.tv