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4 Steps to Franchising
4 Steps to Franchising
By Nick James on June 30, 2010
Once you have decided that franchising is the way to expand your operation and you are satisfied that you would make a suitable franchisor, then the following steps need to be followed to ensure that the move is a success for both the franchisor and franchisee.
Step 1 - Franchise Feasibility
The first step in creating a franchise system is to assess whether or not it is viable to franchise a particular business.
The feasibility study should:
- Identify major strengths and weaknesses of the business
- Determine if the essential features of the business can be duplicated
- Analyse past trading in order to assess whether or not the business can support both Franchisor and Franchisee as profitable entities
Step 2 - Franchise Program and System Development
This involves determining the most appropriate strategy for the development of the franchise network. The franchise program includes determing the precise terms of the franchise arrangement, including territory, premises, product supply, training and support, the rights and obligations of the Franchisor and the Franchisee, franchise feeds and advertising levies.
Step 3 - Franchise Documentation Development
The third step involves the development of the necessary documentation for the system. Typical franchising documentation that needs to be developed includes:
- Franchise profile documents
- Franchise disclosure documents
- Franchise agreements
- The operations manual
- Franchise induction sequence
This fourth step requires the development of the most appropriate strategy for implementing the franchise program, the strategy for implementing the franchise program. The strategy will include advice on the marketing of the franchise and the recruitment of suitable Franchisees.
However, implementation of the system is not the end of the process. As franchisor your area of responsibility will encompass the welfare of not only your original business, but the continued viability of the franchise system and your franchisees. The major reasons that franchise systems fail include:
- Poor franchisee selection
- Poor franchisee training
- Lack of continuing product development
- Too rapid expansion
- Poor monitoring of franchisee performance
- Lack of proper conflict resolution procedures
- Greed on the part of the franchisor