In the second of our new series covering all things franchising, resident expert David Burton considers “B” for “business model” – often considered to be the blueprint underpinning any successful franchise.
Franchising works because there is a proven business model and all the right support from the franchisor in place for franchisees to succeed.
Your business model determines the identity of your brand and incorporates your strategy for achieving your goals, including the service delivery and environment in which you operate.
There are however, two types of business models within franchising and both must remain fluid and developable for a brand to remain relevant. “Make a plan and stick to it” is a well-known business coaching mantra and whilst your plan can remain constant, your business model must continually adapt. You are not in control of the environment you operate, whether that’s the competition, customers or industry; move with the times and ensure that your business model is adaptable to achieve your long-term plan, whatever that may be.
The model and systems created to operate the business carrying out your service is the first type of business model. These are the systems that you will train your franchisees in, demonstrating to them the brand’s value, the profile of their customers and how they carry out the service. Franchisees then have the freedom to exploit this model, positively, to the benefit of your brand.
When you decide to franchise your business, you are shifted into a completely different role of the franchisor. The second type of business model must now be developed, as you no longer offer the day-to-day service delivery but have a new role to recruit, train and develop franchisees that have invested in your brand.
The business model here determines how you will operate as a franchisor. You will have to change your thinking from operator to brand leader – focussing on training and development programmes, central management functions, fee structures and franchisee agreement terms, ensuring that your franchisees have everything they need to succeed.
The way in which you develop your franchisor business model sets the future profitability, growth and sustainability of your brand. Your business will need to employ experts in training, marketing, operations, IT, HR and finance – does your budget allow for the increase in new staff? Setting royalties too high can deter franchise investors but setting them too low and you could be missing out on millions of pounds in revenue. You have to plan ahead for franchisees exiting your business – what strategy do you have in place for franchise resales when a franchisee needs or wants to leave the system?
In the UK, according to the British Franchise Association, a business model must have a defined and proven method of trading for it to be considered a “Business Format Franchise”. Any prospective franchisor must test its model over a period of 12 months or more, monitoring each and every eventuality, activity, result and challenge that formulates the business’s success.
The reason franchisees are investing in your system is because it’s a proven method – you’ve been there and done it and they can make money from it. The business model of the service and the business model of the franchisor must both support the delivery of this goal.
“Follow the system and the system will lead you to success”, is the catchphrase of Catriona Berry, brand operations manager for Merry Maids – ServiceMaster’s domestic cleaning franchise brand. “Our franchisees choose to invest in Merry Maids, or any of the ServiceMaster brands because they don’t have to think up a new idea, they don’t have to go it alone and they already know that the business works.”
“We’ve been cleaning homes across the US, Japan, Canada and the UK for more than 35 years’ so we know the business model is still relevant and our franchisees reap the rewards for following the model.”
If you’ve built your business from the ground up and taken the decision to franchise your brand, the hardest thing to do is to let go of some of the control. Franchisees, no matter how engaged they are in the brand and the business model won’t deliver the product or service exactly how you would. However, great franchisors train their franchisees to deliver a consistently high level of service and provide ongoing support to coach and ensure that the brand integrity remains high.
A solid franchisor business model will ensure that your brand proposition is attractive to investors, which will result in a consistent revenue stream for you, allowing you to continue to train, develop and support your growing franchise network.
David Burton is communications executive at ServiceMaster – one of the UK’s longest-running franchisors, operating over 350 franchised licenses across the country.
Miss last week’s Franchising A-Z? Catch up on our expert’s view on what “attitude and aptitude” mean for success in franchising.
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