Franchising can be hugely lucrative, if you get the formula right. Here, CEO at Sandler Training and owner of more than 30 UK franchises, Shaun Thomson, reveals why franchisors must remember to treat franchisees with respect.
As a successful franchise owner I often find myself extolling the benefits of franchising when speaking to other business owners. The main franchising questions I hear are:
(1) I want to be my own boss. Should I opt for franchising or start my own business from scratch?
(2) I want to scale my company – should I franchise it out?
(3) I’ve taken the leap into franchising – what pitfalls do I need to avoid?
Go it alone or franchise?
Lets start with the first question. Franchising is a great way to start your own business as it minimises many of the problems that rear their ugly head in the first years of being your own boss.
For example, when you open a successful franchise you know that you have a tried and tested business model, so many of the initial teething problems of establishing a business can be avoided.
Plus, by opening a franchise you can get started much more quickly, as you do not need to develop all the content, written materials and intellectual property from scratch.
There is also a support network – you call upon fellow franchisees and ask them questions and then apply the learning’s from their own mistakes, which saves you from making them yourself.
It’s an intelligent and considered way to start a company. I very often hear sad stories from people that jacked in their PAYE jobs because they had (what they thought was) a stellar idea for a new product or service. However, they quickly realized that the path to take a concept to a fully-fledged successful business was a very rocky one.
Having an idea is just one part of a very complex puzzle. Business growth is dependent on having the right skills, structure, strategy and staff. Knowledge of these four things is not innate and business founders often lack experience across some or all of these pillars.
With a successful franchise model the experience and support comes as part of the package, which massively enhances the opportunity to succeed.
Growing through franchising
Lets move onto the second franchising question I hear a lot – whether a company can or should franchise their business model. As a fan of franchising I certainly think that it can work extremely well, but this must be heavily caveated.
Firstly, the would-be master-franchisor needs to ensure that their business passes the realism test. Franchising should not be considered as a cheap way to market. It’s a great model for the right products and services, as long as you can tick each of the following boxes.
(1) The franchise can be easily replicated
Entrepreneurs opt for franchising to fast-track their market entry – the benefit for them is that they don’t need to develop the product, content, market or materials from scratch. Think about your proposition from their perspective – how compelling would the franchise be if you were in their position?
(2) The franchise will be mutually profitable
There needs to be a sufficient margin in the model for it to be a win for both the franchisor and franchisee.
(3) The franchise has unique intellectual property
Your business proposition must have unique intellectual property that fulfills a fine balance of enabling franchisee to use and sell the product and service, without making it easy for them to copy it.
The fact is the business needs to be running well before franchising can even be considered. You cannot expect others to follow in your footsteps until you yourself have established a successful, profitable business model.
If you pass these tests then the most important thing to bear in mind is that you must set high standards. Not everyone is a suitable franchisee for your business.
Running a successful franchise isn’t for anyone, and I certainly decline a lot more people than I accept. You have a brand and standard to protect, and your customers must be assured that they will get high standard, regardless of which franchise they are dealing with.
For those that have taken the leap into franchising, then the key piece of advice they want to hear is what pitfalls I can flag that are endemic to franchising and how they can be avoided.
Many are the same as those you’ll encounter when running a successful, established business – such as staying relevant, engaging staff and enhancing the customer experience.
However, a specific franchising pitfall I would flag is ensuring that you always keep in mind that your franchisees, or fellow franchisors, are all independent businesses, not employees.
You cannot just tell them to do something – you have to get consent, and to do this you have to be a good communicator and negotiator.
As with the school playground, play nicely and treat others how you would like them to treat you.
Shaun Thomson is CEO at Sandler Training in the UK, providing sales and management training to small businesses.
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