Converting Your Business into a Franchise
Every business owner dreams of a way to expand their business and become the next great franchise of the nation. By leveraging on the success of an existing business, franchising expands it to make ways for better growth and profit. The well-known brands like McDonald, Pizza hut and many more have taken up this model and implemented it very successfully on a global level. Australia being the most franchised nation has got its own home-grown franchises like the Eagle Boys Pizza, Australia Skin Clinics, Terry White chemist etc., making these brands a household name.
More than 90% of Australia’s 1200 franchises are home grown. The franchise boom in Australia has given customers better value and standardised services. It is set for more growth in the coming years and also paves way for businesses to flourish overseas. The failure rate of franchises is also estimated to be very much lower to that of independent stores making them one of the most widely adopted method to keep the business expanding.
When Should You Consider Franchising?
Franchising cannot be done as a blind step or as an act of impulse. It requires careful planning. Your business must already be running and must have had success in its current location. Your business must be running at least for five years and should have overcome the market obstacles and proven itself worthy of a franchise. A franchisor may make use of this time to prepare for the next stage of growth by pilot testing on few outlets using their own capital. Once you are sure about the viability of a franchise, you should be able to secure the right partners and funding for setting up your franchise. Australia has put down some strict regulations on which businesses can be frachiseable. To qualify as a business that can be franchised, it should have the following qualities.
Your concept must be credible with a good track history and public acclaim.
Your profit margin should be high enough to support the new outlets.
Your unique selling proposition is what makes you preferable over your competitors. This is very important if you want to compete in local and national level markets.
Your system must enable the smooth transfer of skills and expertise.
Your franchise must be priced at the right value so that people could willingly buy into your network.
Benefits of franchising
Franchising brings in both financial and marketing benefits that help you build a stronger brand image. Some the benefits of franchising are
- Franchising provides on-going support to both the franchisor and the partners who get involved in the business.
- It acts as an effective capital rising strategy.
- Franchising enables you to focus on better customer services and standardised service deliveries. By recruiting the right franchisee, franchises can ensure an average of 7 years of commitment to the network from the franchises. Studies reveal that franchises outperform standalone stores by at least 15 %.
- Franchising builds a consistent image of a brand that helps you compete in the national and global level markets effectively.
- Franchises help manage risks effectively.
- Ability to grow rapidly.
- Franchisor can adapt an effect HR strategy with fewer staff.
How to Convert Your Business into a Franchise?
Get a proper understanding of your current business and model a sound plan for implementing your franchise network. You should have a strong financial proposition to that will help you realize your plans. You need to prepare structured planning, research and capital to implement your franchise. You will have to make a complete financial analysis on your current business and projected development. You should consider ‘what if’ scenarios and must have everything in readiness as there is no room for error in franchising.
Get help from a professional body like the FCA that provide you with legal and financial advice on franchising. Make sure you follow all the codes and regulations put forth by the Franchising Code of Conduct that is in practice since July 1, 1981. This code is enforced by the Australian Competition and Consumer Commission and you wouldn’t want to suffer the severe penalties given for breaching the code.
Some general guidelines on how you can go about your franchising are given below.
- Pilot test on your own outlets.
- Make sure your business model is replicable and unique.
- Get professional help
- Make use of an operations manual for consistency of business processes.
- Use legally correct and valid franchise agreements with the help of professional lawyers, most preferably from the Australian franchise Council.
- Choose your recruits and franchisees carefully and slowly.
- Overselling and forecasting should be avoided.
- Provide measures for effective training.
- Keep on improving your franchise standards.
- Make sure your relationship management is given focus and taken care of properly.
- Set your investment cost and make arrangements for the on-going fees.
- Efficient staff that helps you with management and support activities are very important. So make sure you get the right person seated on the right job. You can also make use of an experienced franchise consultant to help you with understanding and develop a good franchise for your business.
- Focus on your franchisees and their profitability also.
Trying to make a successful franchise requires patience, skill and the right partners for things to work great. You may not see a quick return either. It takes at least three years to stabilize your franchise establishment and derive a promising profit from it. But once your franchise network moves into the net profit and achieves a good deal of maturity, all the pain and effort you had to put in will disappear with the benefits that franchising gives you.