Your business is doing well and you want to expand. Rather than investing in new premises and employing lots of staff, another option is to become a franchisor, leasing your trademark, systems and branding for a fee and percentage of the profits. If successful, franchising allows for a company to grow nationally at a fast rate, with minimal disruption to the funds of the core organisation.

Can your business be franchised?

Not every business can be franchised and there a number of things to consider before embarking on this journey.

  • How easy is it to transfer your service, expertise or know-how to someone else? This is crucial; you must create a standard ‘formula’ that can be easily understood and quickly implemented, for the biggest chance of success, for you and the franchisee.
  • Why will franchisees want to join your business and will it work in different places? To attract franchisees in the first place you must be able to prove success and have a brand that has already achieved a certain amount of exposure. Crucially, your business should also provide a product or service that is nationally relevant to help safeguard against failure in certain regions.
  • Is your business generating enough gross profit margin to enable you, and your franchisees, to make money? An obvious one, but if profit margins aren’t high enough for the core business, it is unlikely that franchisees will fare any better. Franchising should never be considered as a quick fix for an ailing business.
  • Can you provide solid ongoing support to your franchisees? As part of a good franchise, franchisees should expect wide ranging support; from marketing and PR to provision of materials, plus someone available for advice and to bounce ideas off.

What’s in it for my business?

Becoming a franchisor is not an easy way to expand but it can be very rewarding and there are a number of benefits for choosing this growth route.

  • Motivated staff: Franchisees are typically motivated individuals who have made a personal investment which will drive them to succeed.
  • Lower costs: The costs involved in establishing a franchise are much lower than ‘traditional’ expansion, as while you will have to set up the system and provide on-going support, most of the capital for individual outlets is provided by the franchisee.
  • Brand building: Franchising combines the best of big business with the personalisation of a smaller, local approach. A franchisee from a particular area will be more acceptable to a community than a faceless organisation, helping to build the brand and positive perception of your business.
  • Ongoing revenue stream: The percentage of profits that you take from the franchise will add favourably to your profit margin, which, overtime should develop into a significant part of your revenue.

Franchising can be great way to take your business to the next level, in a fast and structured way, but, you must make sure you choose your franchisees wisely – success or failure largely rests on their shoulders and a bad franchise could be immensely damaging to your brand.

If you are interested in becoming a franchisor, seek professional advice – the British Franchise Association (BFA) is a good place to start.

Anita Brook is the founder of Accounts Assist