Document your proceduresTo start, you need to be very clear about how your business works. Most small business owners and entrepreneurs instinctively know how to run their businesses and deal with any problems or issues they encounter. However, the key to a successful franchise is consistency. You need all of your franchisees to be able to run their businesses using the same systems as you and achieve the same results. To help them do this, you must document all of your processes and procedures and collate them into an operations manual. This operations manual will contain the day-to-day instructions your franchisees must follow to run their business according to your systems.
Protect your brandWhile you?re documenting your procedures and preparing a first draft of your operations manual, you should also be protecting your brand as a portfolio of trade marks. Although Nando?s is not a franchise in the UK, the Nando?s versus Fernando?s dispute is a classic example of what could happen to you as a franchisor. I wrote about this in a previous article, but very briefly Fernando?s opened a chicken restaurant with very similar branding to Nando?s. Nando?s threatened them with trade mark infringement and Fernando?s rebranded. It wasn?t the size of their business that gave Nando?s this power, it was the strength of their trade mark portfolio. This is something that a business of any size can achieve and doing so doesn?t have to cost a fortune. The Nando?s brand is very well protected. They have protected their name, their logo (in various colours and formats) and even elements on their menu such as the ?peri-omiter? chili logo. So, what can you protect? Think about all the different elements of your business. How you can make them distinctive so that they?re instantly recognisable as yours? If you need to rebrand some of them so that you can register them as trade marks, now is the time to do it. If you can?t stop copycat businesses setting up in direct competition to your franchisees, they will wonder why they are paying you a franchise fee. Your franchise will then be worth a fraction of its potential value.
Test the franchise with a pilot operationBefore selling a franchise to a potential franchisee, you need to prove that someone other than you can follow your systems and run a successful business. To do this, set up a pilot operation (or preferably two). The pilot operation may be a new business owned by you, or it could be a franchisee who you offer preferential terms to because this exercise will be a learning curve for both of you. The pilot operation should run for at least a year so the new business can experience all trading conditions. During this time, you should be analysing their results, refining your systems and ironing out any potential difficulties. Some of the most successful franchise businesses are the ones where the franchisors give their franchisees the best support and training. During the pilot operation you should also work out what initial and ongoing training you will need to provide to ensure your franchisees can achieve consistent results. When you?re confident you have a system that someone else can successfully follow, you?re almost ready to start selling franchises.
Preparing to sell franchisesFollowing the successful completion of the pilot operations you will have to finalise your operations manual and also prepare a franchise agreement that franchisees can sign up to. The franchise agreement is a legally binding contract which serves two important purposes. First, it gives the franchisee the right to use your brand and business systems in their own business; and second, it enables you, the franchisor, to control the franchisee to ensure they follow your systems exactly as you want them to. In the UK, there is very little formal regulation over franchise businesses. Instead there is a system of self-regulation through the European Code of Ethics for Franchising. This gives guidance on best practice in the franchise industry. If you wish to become a member of the British Franchise Association, something you should seriously consider, you will have to abide by this code. This code requires you:
- to have operated a pilot scheme before launching your franchise;
- own all of the relevant brand names and trade marks; and
- provide your franchisees with initial and ongoing training.
- Can I franchise my small business? 4 elements to successful franchising
- The advantages and disadvantages of buying a franchise when starting a business
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