Franchising is an increasingly popular way of growing a business. However, before even thinking about selling franchises, it is important to take professional advice at an early stage to make sure that your business is suitable for franchising – not all businesses are.
It is also worthwhile doing some due diligence yourself to work out whether there are fundamental reasons why your business many not be suitable for franchising. Here are a number of potential hurdles and how they can potentially be overcome.
1. Market penetration
Typically, franchisors will need a strong brand to be able to successfully franchise. Your franchise marketing plan should provide for the growth of your brand in the marketplace, both to customers and also prospective franchisees.
2. A growing market
Businesses that are suitable for franchising are usually either in a growing or at least stable market. It would be unwise to franchise a business whose market is dwindling, unless you can make changes to the business model that is likely to turn this around.
3. A seasonal business
Seasonal businesses are not always regarded as being suitable for franchising. However, it may be possible to market your franchise to particular franchisees to whom it is entirely suitable. For instance, a business in the outdoor Christmas decoration market may well be ideal for someone involved in outdoor seasonal work that tends to dry up during the winter months, such as gardening.
4. Your business is specialist and can only be run by professionally qualified individuals
Many successful franchises can be easily run by anyone, subject to the usual franchise training. However, it may be that your business will require the franchisee to employ people with professional qualifications e.g. an opticians. Such businesses are potentially suitable for franchising, but are likely to be more of an investment opportunity rather than owner managed.
5. Trading history
Many start-up franchises do not have much in the way of trading history. However, provided that the business concept is proven, you can still run a pilot operation and then roll out a franchise network.
6. Your personality and individual skills are key to success
Many businesses depend on the particular character or skill of the owner in order to succeed. However, when developing a franchise network, in addition to providing your franchisees with a comprehensive manual and also training, you also need to ensure that you recruit franchisees with the right personality type for your business. For instance, you will need a different type of franchisee to run an after-school dance club as opposed to a mobile tyre fitting service.
7. Geographical limitations
A business with specific geographic limitations that cannot be overcome may well be unsuitable for franchising. You will need to decide whether it is sufficiently economic to grow a franchise network with a restricted number of locations.
8. The business requires a significant central support service
One of the benefits of franchising is that you, as the franchisor, will be able to own and operate a central support service, for which you will potentially be able to charge the franchisees. It is important that this is properly costed to ensure that it is feasible from a financial perspective.
9. Your experience of franchising
It is possible, by retaining appropriate professionals, to franchise your business even though you personally have little or no personal experience of the sector. Luckily, the franchise sector is well supported by experienced professionals who will be able to assist you with all aspects of franchising your business.
If you have any questions about the above, Darwin Gray’s specialist franchising team will be able to advise you on whether your business is suitable for franchising, and also on any modifications that may be required to overcome any hurdles.
The team is headed by Stephen Thompson, who, in addition to being affiliate member of the BFA, is the chair of the South West and Wales branch of EWIF (Encouraging Women into Franchising) and is also one of only 2 Qualified Franchise Professionals (QFP) in Wales, the second of which is another member of the firm’s team, associate solicitor Siobhan Williams.
