As a franchise consultant, I speak to business owners daily and commonly hear the same misconceptions about franchising regularly, so I want to shed some light on some of the realities and facts about franchising and what that means to a small business owner in terms of a potential growth model.
Hopefully, I will dispel some of the myths and rumours you hear and provide examples of how franchising has helped businesses to expand. Let's begin with the most common thing that business owners ask me is, “Is my business franchisable”.
I always have the same response: you need to look at your business model and value proposition and say what do I have to offer Franchise Partners? I ask four questions to help determine if they have a model that will be attractive to a potential Franchise Partner.
1. Is there a consistent market for my product or service? One of the most fundamental requirements of a successful business is having a constant stream of potential customers. I'm not talking about guaranteeing work, I'm saying, is there an established market for your product or service that isn't hindered by ongoing supply issues or seasonal.
2. Can Franchise Partners make good money in this business. If you're buying a business, whether you're buying a franchise or an independent business, you are doing it to improve your position; you're doing it to earn more money and hopefully set yourself up in some way for the future. Or maybe build an asset that you can one day sell for more than you bought it for. The income question is important, franchisees want to know they can make more money in this business than they can as an employee doing a similar job in the same or similar industry.
3. Are there proven systems, when I say proven systems, I'm not saying that you have fully documented operating systems and processes. I'm saying that if you've been operating for a reasonable period, you have a set of processes that you apply in the day-to-day operation of your business. Where you started when you first launched your business and where you are now, has probably been a progression of improvements. You've improved efficiency, and you've been able to achieve outcomes for less cost, so this is ultimately what a Franchise Partner is buying into.
4. Is the Franchisor committed to helping me be successful. If someone is considering buying into a franchise, they’re doing so because they want to be in business for themselves but not by themselves. It's quite a different psychology to somebody wanting to buy their own independent business and be fully accountable for all their decisions and outcomes. Franchise Partners tend to be, for the most part, risk-averse so they want to be self-employed, but within a supported environment. They want to know that the Franchisor has the skills, passion, and drive to help them be successful.
Those are the four fundamental questions to which you should be able to answer ‘yes’. However, there is a bit of an exception on point three around the proven systems.
We have successfully worked with start-ups who have launched the business in a franchise model and have successfully attracted Franchise Partners.
Another question I am commonly asked is, ‘What if I don't have a well-known brand’? ‘Can I still attract Franchise Partners?’
Believe it or not, you don’t have to have an established brand to attract Franchise Partners, but you do need to be very clear about your value proposition and clearly communicate that in a compelling way to potential Franchise Partners.
Key to franchising your business is knowing your business model advantages, which can be a range of many things in the service industry. For example, a Franchise Partner might feel more confident if there is an existing client base within a territory, enabling them to earn money from day one. That said, the majority of franchises granted are ‘greenfields’, which means that the Franchisor is selling the rights to a new territory, likely without an established customer base and then assisting the Franchise Partner with set-up.
As I said, you must be able to communicate what you do better than your competitors, and this doesn't have to be anything ground-breaking. I've spoken to many clients that work in the home services sector, and their clients tell them that they were just glad somebody answered the phone. Believe it or not, that can be quite a strong advantage for a business. So providing call centre support to ensure no sales opportunity is missed could significantly increase sales and be attractive to Franchise Partners.
Some of the reasons that a Franchise Partner may choose an emerging franchise brand over an established franchise brand could be factors such as a lower cost to get in. An established franchise brand might charge higher fees coming into the system. So keeping the barrier to entry low, and attracting the right Franchise Partners is just smart.
It is also important to remember that franchising is a relationship. Franchise Partners ultimately want to know that there is somebody on the other end of the phone when something hasn't gone quite to plan. Being able to work alongside the Franchisor in the early days of a franchise system can actually be quite appealing and when you look at some of the larger franchise systems, you know that the Franchise Partner isn't going to have access to the Franchisor. They are going to have access to the Franchisor's employees who are paid to do a job, and probably are not as passionate about the business and the brand.
Another advantage of a new franchise system is there are many more territory options available, so the Franchise Partner is more likely to get the territory closest to where they live or the territory that they think will give them the best chance of success.
It's important to really understand what you've got to offer Franchise Partners you don't have to have a big established brand to be an attractive proposition, but you do have to be very clear on your value proposition and communicate it well.