Franchise Advice
“Many prospective franchisees choose franchising because of the proven business model and support on offer”
I
f you are reading this, you are probably wanting to start your own business and possibly looking at business format
franchising as a way to do this. Business format franchising is a process where a person (the franchisor) grants a licence to another (the franchisee), entitling them to trade under the trademark or trade name of the franchisor. This agreement allows the franchisee to use the franchisor’s proven business model and access to initial training; this enables a previously untrained person to run the business with ongoing support from the franchisor. As with any business investment, opening
your own franchise territory requires a significant investment of time and money to make it a success. However, there are elements of the franchising format that help new business owners to get started and maximise their chances for success. Before setting up their franchise operation,
the franchisor must have a successful core operation that can be replicated in other geographical locations. They will conduct research to ensure that franchising is the right way to expand their business and that they have the resources available to support a network of franchisees. If all of this adds up, the franchisor will begin to compile the documentation that is at the heart of business format franchising. Firstly, the franchisor will create their
operations manual. This is essentially their business bible and the handbook that will be shared with new franchisees to help them build their business. The operations manual is often a long and detailed document, covering areas from brand guidelines to handling customer complaints. Secondly, the franchisor will work with a
solicitor who specialises in franchising to draft a franchise agreement. The franchise agreement is a legally binding document between the franchisor and the franchisee – it stipulates the conditions of their relationship. A good franchise agreement will contain protections for the franchisee as well as the franchisor’s brand, while also detailing processes for dispute resolution and conditions for termination of the relationship by either party. A prospective franchisee should always get this document checked by a specialist franchise solicitor to make sure they are protected and the agreement is thorough. The idea of entering into a legally binding agreement with a larger brand can seem daunting. You will have a responsibility to protect the brand while you run your business. Although you will own your business and the responsibility for running and growing it is yours, many franchisors track the performance of their franchisees. This helps them to assess the health of their network and identify franchisees who
are struggling and require more support. From the outside, it can seem that you will still be reporting to a ‘boss’ figure; however, despite your responsibilities to the franchisor, the business is yours and you manage your own workload, schedule and finances. Many prospective franchisees choose
franchising because of the proven business model and support on offer. The franchisor should provide evidence that any financial projections they make have been met in the past. They should also offer the opportunity to speak to a few franchisees from their network; this enables you to discuss their experience with the franchisor to date and the support they have received. One thing to note is that the franchisor should allow you to choose the franchisees you speak to from a list of their entire network, which prevents the franchisor from picking only their happiest franchisees. You can ask the franchisor to suggest a few franchisees who are excelling, a few who are average performers and a few who are struggling – choosing one from each of these areas will provide you with a better understanding of how the franchisor tailors their support to the needs of the franchisee and their business. To buy into a franchise you will have to
pay an initial franchise fee; you will continue to pay management service fees to the franchisor throughout the term of your business
18 | The Franchise Magazine 2018
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