Monday, December 15, 2008

Should I Franchise My Business?

In today’s world of fierce competition and fast-paced business, franchising is proving to be an increasingly popular method of business expansion. Companies can sprout from local brands to household names in a relatively short period of time whilst still being rewarded financially and being free of massive liabilities that usually accompany traditional growth. Leaving a unique business concept to grow organically can often take too long and this may leave an opportunity for another emerging company to leap frog the market share and nullify all growth plans. Expanding too fast however can also have devastating implications and there should be a solid franchise development plan in place before a company embarks on such a project.

Although many entrepreneurs are aware of the successes that franchising can bring, most business owners are not familiar with the actual process of transforming a concept into a successful franchise chain.

It is without doubt that a successful franchise concept starts with solid foundations, a sound track record and an established business model. However, time and time again we see franchises starting out with titanic-like enthusiasm only to find that these franchises don’t even make it through their first year! Those considering franchising their business need to be enthusiastic yet they also need vision as well as a strong focus on delivering a good quality product/service and looking after franchisees well.

Here is a checklist to help entrepreneurs decide whether they should franchise their business.

1. Do you have one successful business model running already?

• This is one of the most important factors in franchising your business. This is the model on which all your future franchises should be based. Don’t even think of franchising a brand new business – rather let it establish itself, iron out business flaws, create a solid business model and make a profit!! Once the business is running like a well oiled machine, then start considering franchising as a means of growing the business.

2. What are the unique factors that make your company perfect for franchising?


• Ask yourself whether your franchise concept is original and write down 3 unique factors that set it apart from your competition. Potential franchisees want a business that not only works well but something that is different and difficult for competitors to copy.

3. Have you consulted a franchise expert, FASA or a lawyer to discuss a franchise disclosure document and franchise structure?

• A well-written franchise agreement is an absolute must and is worth the expense. Try use legal experts that are familiar with franchising and can give practical advice and guidance. You may even want to consult with a firm that specialises in converting successful businesses into franchises such as Indus Consulting


4. Are there sufficient profit margins for franchisees?


• The success and growth of your franchise is largely dependent on the success and profitability of the franchisees themselves. If a franchisee makes a decent profit for their hard work and investment, they are more likely to stay motivated and run the franchise properly. If the royalty fees are too high and the franchisee does not make a sufficient profit margin, they will soon lose interest and the franchise may very well fail. As the franchisor, you need to ensure that the profit distribution is fair. This is key - try aim for a win-win situation!

5. Can you afford to become a member of FASA (Franchise Association of South Africa)
• Consider franchising your business when you can afford to be a member of the Franchise Association of South Africa! Currently it costs over R12 000 per year to be a member. This adds a significant amount of credibility to your business and if you are serious about franchising this is an absolute must.


Once you have decided that your business concept is suitable for franchising ie. It can be built on solid foundations, then start putting the steps into motion to franchise your business. The franchising process is not an overnight procedure and rushing into it can result in costly mistakes. Plan well and execute plans professionally.

By Louise Sanders

No comments: