From Idea to Franchise Success: Guide

Transforming a Franchise Idea into a Business Opportunity

The first aspect to underline here is that, no matter how fantastic you think your idea is, you cannot simply turn an idea into a franchise. However, you can turn an idea into a business and then develop that business into a franchise.

Definition and Basic Concept of a Franchise

The franchise, or franchise in business format to give it its full title, is a business relationship in which one party (the franchisor) grants rights to another party (the franchisee(s)) to replicate their proven business system and trade under their name. In return, the franchisee will pay the franchisor both initial and ongoing fees.

It is true to say that most businesses could be franchised, but not all businesses should be franchised.

Essential Criteria for Transforming a Business into a Franchise

When deciding whether a business could or could not be successfully developed as a franchise, we initially look at five key areas:

1. Proven Successful Format Previously

The franchisor will grant rights to potential franchisees to replicate the initial business. The franchisee will therefore want to see a business that has been around for some time (at least a year and preferably more) and has proven to be successful both in terms of turnover and, more importantly, net profitability.

If this is not the case, then why would anyone want to replicate it? Because the first year of trading in many businesses is not particularly profitable, and often produces losses due to setup costs, it is therefore advisable to wait a longer period until the business matures before starting the franchise.

2. Easy to Duplicate in Multiple Locations

The "franchise in business format" model is based on the assumption that the franchisor will receive a relatively small percentage of the total turnover or profit of the business of each franchisee. Therefore, there must be a sufficient number of franchisees contributing to the franchisee's income.

Therefore, the universal appeal of the product/service must be analyzed, as the franchisor's income will depend on the number of locations. While a "haggis" franchise might do well in Scotland, it might have limited appeal in other areas. The longevity of the concept must also be considered.

3. Relatively Easy to Master and Replicate

The franchisor will always seek to choose franchisees with the right set of skills to learn and replicate the business model. The training period required for incoming franchisees is therefore crucial.

Easy to master does not mean simple for everyone. The franchisee must have marketing and business development skills, and the employed staff must possess specific practical skills (e.g., hairdressers in beauty salons).

4. Generates Enough Profit for Both Parties

Both the franchisor and the franchisee must receive a satisfactory income from the total profit generated. The management fees paid by the franchisees must cover the franchisor's costs and generate a profit.

5. Strong Reasons for Choosing a Franchise

There are several key reasons why a franchise is a safer choice than an independent business: already proven system, knowledge and experience of the franchisor, brand strength, launch package, ongoing assistance from the franchisor, facilitated support from banks.

Right Profile for a Franchise Entrepreneur

In conclusion, franchising requires a certain type of leadership and entrepreneurial skills. A responsible franchisor must be very careful in selecting franchisees. He must adopt a management style based on trust and freedom of action from the franchisee, not a micromanagement style.

A responsible franchisor must be very careful in selecting his franchisees. Think of your business model as your "baby" and the franchisee as its nanny. Would you trust to entrust your "baby" to anyone and let them handle it? Or would you be stressed worrying that the child is not being properly cared for? This can be the benchmark test to determine if franchising is right for you.

If you would like to learn more about franchising your business, click here to contact the Franchising Center - Franchise for a FREE consultation