Franchise Advice
“From the moment the investor acquires the master franchise rights, we remain on hand to assist in the rollout”
M
aster franchising off ers an opportunity to acquire a brand proposition that has already been successful in its own
market overseas and then introduce it into your home territory.
The brand brings with it an established
reputation, and all the associated collateral of a fully functioning business, which means that the master franchise partner (ie the investor) has, potentially, the tools to build a scalable business. This can be achieved either by corporate outlet growth or by sub-franchising – or by a combination of the two. Inevitably, taking on a master franchise licence can involve a substantial investment amount.
Done well, master franchising can be very successful – think of brands such as Domino’s Pizza, Home Instead Senior Care and Hertz Car Rental to name three. From the franchisor’s perspective, it is important that they have belief in the prospective investor. There is a lot to think about, whether you
are responding to a brand actively wanting to enter into the UK, or are approaching a company that you have identifi ed as having attractive features that you would like to bring onto the market. Either way, the following will be relevant:
Establishing your requirements The fi rst step would be to gain a clear understanding of your existing activities and business experience, as well as the opportunities that you perceive in the market and your future aspirations.
We recommend: • Evaluating and understanding the type of franchise that you could develop
• Producing a business profi le and an overview of your target location. This will assist in indicating your potential to the franchisors
• Identifying the diff erent business categories that would be of interest and suitable for you to operate
• Finding out the type of franchise agreement that would be suitable for you to operate, such as master franchise, area development franchise or joint venture
• Deciding on the nature of franchisor to be sought, such as a new concept brand early in its international expansion or a well-established brand in a mature market
• Establishing the initial level of investment – both the master franchise licence fee and startup costs, together with your expected return on that investment
Market research There are two aspects to this: one, you’re responding to a brand that is actively marketing its concept, and in this case you need to undertake research to ensure that the brand has the potential; two, you are actively looking at the international franchise market for concepts that: • Fulfi l your requirement as to business segment and investment opportunity, while being mindful of the character of the franchisor
• Have not already allocated a master franchise, area development franchise
or joint venture operations for your target marketplace
• Meet the agreed criteria for the initial level of investment, both for the master franchise licence and the startup costs, along with the return on your investment
The screening process To evaluate the suitability of franchisors it’s crucial to: • Gain an overview of the business, its structure and track record
• Ensure that its intellectual property rights, and distinctive or unique selling features, are well developed
• Look into the operational support services and training materials that will be made available at the commencement of the relationship and ongoing
• Understand fully the long-term goals and ambitions of the franchisor for the brand in their own market and internationally and how this would fi t with the UK market
Furthermore you will need – most likely with the help of a consultancy – to: • Negotiate heads of terms • Ensure the master franchise agreement is fair, reasonable and operable • Compose your franchise business plan
From the moment the investor, or investor organisation, acquires the master franchise rights with the potential to sub-franchise, we remain on hand to assist in the rollout and in the franchise knowledge of the new investor.
Nick Williams
is a managing consultant at Ashtons Franchise Consultants
June 2018 |
BusinessFranchise.com | 31
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