How to prepare your business for franchising to others
15-04-2021
I’m Brody Sweeney, the founder of Camile Thai Kitchen, an award winning home delivery franchise. This blog is not about my business, but rather some advice for if you’re thinking about franchising, or indeed already involved in it – and want to learn more.
Franchising your business so others can benefit from your winning concept is a rewarding and lucrative way to expand your concept – if you get it right.
There are some fundamental things that good companies do, to give themselves every chance of franchise success. I’ve distilled them below into 10 things you can do which will substantially reduce the risk of it all going wrong.
1. Establish a pilot business – test, test, test
The very essence of every successful franchise is a proven concept. Until your concept is proven, forget about franchising it. You may be coming from an existing successful company owned business, in which case you have half the job done.
But if yours is a fledgling business, then your first job is to get the business model right, and make sure it is replicable.
A good franchise is one where there’s enough customers out there, willing to pay the prices you charge, so you and your franchisee can earn an acceptable profit from it. If you are making too much money, the franchisee can’t, and vice versa.
2. Understand that by franchising your business, you will be running two separate businesses.
Many business people who have developed a successful business think that franchising is something you bolt on to the existing business, like a new product line.
In fact, deciding to franchise your business is like setting up a wholly new business from scratch. The wise operators recognise this, and treat it so.
In my company Camile, we figured out how to run our restaurants as a B2C (business to consumer) business. This involved getting our product range, pricing and marketing right, to make the business appealing to potential customers. This business thrives on thousands of relatively small transactions each week.
But going into franchising is a B2B (business to business) project requires a completely different mindset. Now you’re tailoring your business to a small number of prospective franchisees who have very different requirements than your retail customers. This part of the business has a small number of transactions, for a much higher value.
3. Research your market for similar franchises
Finding similar businesses who are already doing what you are makes for good shortcuts as you think about and design your own business model. You can perhaps see what their franchise marketing material, their agreements, their website etc. are like before you build your own, and you can be inspired by the good bits of what they do, which you can then incorporate into your own business model.
I have never been one for reinventing the wheel, when there are great businesses out there, who have already done at least part of what you are planning. The important part is having your own USP (unique selling proposition) and holding onto that – the structural components are bound to be roughly the same.
4. Get a demographic study completed of your target market
In the old days, picking a good location for your business often came down to local market knowledge and “feel”. This may have got you going, but as you grow your network and particularly as your franchisees start risking their money, a more scientific approach will reduce the risk of picking the wrong location.
There are many companies who can assist you in this. Often the works starts with analysing your most successful existing businesses, and why they are successful. Is it to do with the demographics of the area, or the lack of competition, or proximity to a suitable anchor business. Answers to these types of questions can help you get ever closer to the perfect site, and probably more importantly minimise the poor locations (which every chain business has).
5. Protect your trade name
One of the main assets of your franchise business is your trade name, and prospective franchisees will expect that you have properly protected it so others cannot use it.
This of course implies that you pick a name that is suitable for trademark registration. When we came up with the Camile name (which we did by putting 10 names down on a form and asking 200 people which was their favourite) it had two “ll’s” and was spelt “Camille” – a common French name for a boy or girl – and not trademarkable as it wasn’t unique. However, I realised that if we took one of the “l’s” away - to make “Camile” – this would be trademarkeable, because it was unique.
6. Write your processes down in a manual
One of the key things a new franchisee buys off you is your experience in running the business – what to do, and more importantly what not to do.
Capturing all the right ways to do things in a manual serves two purposes. One is to capture good ideas, and ways to do things, so that everyone can share them. Secondly if you share these things with your franchisee through an operations manual, and something is not then done properly, it is clear where the responsibility lies.
7. Seed the market for prospective franchisees
Getting your first franchisees off the ground is a long drawn out process. It can take a long time. In Camile we started marketing our franchises in 2012, but didn’t open our first franchise until three years later in 2015.
For this reason, you should start seeding the market well in advance of when you actually plan to open your first franchised outlet. Seeding the market means starting to get your name out there in front of prospective franchisees. It doesn’t have to cost a fortune. Franchise Opportunity websites, limited social media marketing on LinkedIn and Facebook can all help.
8. Do anything to get your first proper franchisee on board
Not everyone likes being a pioneer, and not a lot of prospective franchisees will want to be the guinea pig as you get your new franchise off the ground.
For this reason, you should do anything within reason to get your first franchisees on board. If your thinking long term, then the initial fees in the big picture for a first outlet, may not be so important. And the royalty fees could be staggered, to reflect the newness of the business.
In Camile we’ve done things like given a soft loan to help a franchisee make up a cash shortfall, or discounted the royalty for the early years (never have we reduced the marketing contribution, because we need that to build the business).
9. Be so careful with your first few franchisees
It’s so flattering to have a stranger express an interest in your new franchise that it can be hardc to turn a new franchisee down. In Camile, we currently turn down about two-thirds of prospective franchisees for a variety of reasons.
If your first one or two franchisees are not right for the business, that can mean the end of your franchise before it gets started properly. Selecting franchisees (and vice versa - a franchisee selecting you) is not an exact science, but I have found the following analogy helpful. Getting involved with franchisees is like getting married in a business sense. Your new franchisee will agree to be with you, in our case for 10 years, so it makes sense to get to know them as well as possible before making a commitment to them. After receiving an application form (the first indication of intent and commitment), we do a discovery day, where the prospective franchisee gets to meet all our team, and see who is running the business. We then do a psychometric test, and follow that with observing them working a shift in one of our branches.
10. Consider using a franchise consultant
After almost 40 years experience in franchising, and understanding pretty well the nuances of the business, if I was starting again, I would use a good franchise consultant to educate me about the business.
There are many things all new franchisors should do – from registering the trademark, to writing operations manuals, to creating a website and franchise prospectus, and a myriad of other details that will be expected and demanded from serious prospective franchisees. A good consultant (and they’re not all good) will give you peace of mind, and make sure you do it right.
I have been involved in launching three different franchises in my career, and like Murphy’s Law, it costs twice as much, and takes twice as long as planned.
Doing it right from the start not only should make it quicker and more cost efficient, but will give you the best chance of getting past your first few franchisees, and go on to develop a larger business.
Good luck and stay safe.
