Converting a business to a franchise

Franchising is a unique and dynamic business method. A successful franchise will allow both the franchisor and franchisee to reap the benefits. However, franchising should not be considered a fast road to fortune, nor should it be used to assist a business that is not performing well.

Understanding, time and money are all required to successfully establish a franchise. Time required for setting up a franchise could be up to three years and then it could be a further three to five years before the franchisor begins to make a profit from the franchise.

Benefits of franchising include the franchisee’s funds and labour are used to expand the business; franchisor can be free from the day-to-day operations of the business; the franchisor can see a profit without excessive investment in the business; fewer staff management problems; each franchisee will be the owner of the business and therefore more determined to succeed and more franchise businesses can be spread over a greater geographic area, therefore increasing the pool of potential customers.

Franchising is one avenue that can be used to successfully expand a business. Many of the world’s largest corporations have used franchising to speed up their growth as global brands. Like any business venture, a franchise needs to be managed correctly.

There are several guidelines to operate within for those considering expanding a business via franchising. The franchisor should own and operate at least one outlet before franchising commences. The franchisor will then be able to predict any problems and rectify these before others invest in the business.

Also, the business must be profitable and be able to be easily replicable. Before any expansion commences, the franchisor must receive professional franchise advice. A detailed operations manual must be written by the franchisor and the franchisor must also establish a sound training program. The franchisor must be keen to develop the business and be open to suggestions that could benefit the franchise and to maintain standards to ensure consistency across the network. The franchise should have a sound marketing campaign.

An unfortunate statistic is that an entrepreneur has a high chance of failure in their first five years of operating the business. Before franchising is chosen as an expansion method, a business should be trading for at least three to five years to show it has a profitable concept, demand for its good or service and a business structure able to support franchisees in many different locations. If the business fails to meet these guidelines, it may become another statistic of failed business.

Franchise consultants should be approached for advice regarding expansion via franchising. It is crucial for potential franchisors to speak to these experts.

The Franchise Association of India is the country peak industry body committed to strengthening and promoting the best practices in franchising. Franchise Association of India members are businesses and service providers united by their common concerns for the wellbeing of the franchise marketplace.

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