The third in an informative series on franchising; this article covers the franchising readiness from a franchisee perspective – i.e. you are the one looking to invest in a franchised business model in your home market/territory.
As per research and practical application, franchising is often utilized by business leaders embarking in a new business field where they seek an established business model offering them the know-how and an established brand without (too) much effort exerted on the franchisee’s side. Accordingly, the franchisee acquires an established brand that leads to operational success hence minimizing the financial and business startup risk. Franchise agreements oblige owners of franchised units to deliver a homogeneous and consistent experience of the franchised brands to customers. However, if you as a franchisee are not willing to put in the work to establish the brand in the local market, then you would both jeopardize your investment and the franchised brand’s presence in your market. Below is a brief discussion of the issues you would need to consider before venturing out and seeking franchisable brands for your home market.
1. Brace for know-how
- If you are “buying into” an established business, then you must keep an open mind (and possibly pocket) to absorb the know-how associated with the franchise. Acquiring the franchisor’s know-how on how to set up and run the business will offer you the building blocks towards building and sustaining the franchised business in your home market
- The franchisor spent time, money, and resources building a successful business model that you are willing to franchise in. If you are not willing to capitalize on the accrued knowledge from the franchisor to successfully build the business in the local market, then you should not consider franchising in the first place
2. Financial setup
- Do you have the finances associated with acquiring a franchised business – franchising fees, legal fees, trademark registration fees, royalty fees, etc.? Are you willing to invest in the setup, fitout, training costs, employment, product/service, marketing, consequent units, etc. as per the franchisor’s requirements?
3. Contractors
- Have you identified local contractors that meet the franchisor’s standards? Do you have any previous experience with them? Do they have access to materials required for your fitout/manufacturing/presentation needs?
- Do they have a project management track record? Are you sure they will abide to the set budget, schedule, and resources?
4. Recruitment agencies
- If you are to franchise a unique product or service business, do the local recruitment agencies have access to adequate candidates? Have they worked with you or the franchisor in similar projects before?
- If international employment required, are the agencies aware of the required paperwork and timeframe? Do they have affiliations in these markets guaranteeing the screening of these potential candidates?
5. Should you franchise outside of your scope of work? Or create complimentary services/products bouquet?
- Even if the franchisor is providing the know-how of the business, it would still require professionals with experience in similar fields to run the business. If this isn’t your area of expertise, can you still adequately assess the success factors related to the business field? Or would hire the business leaders from within or outside your company resources? And if you do, would you be able to understand the business performance measures?
- If you planning on creating a group of complimenting service/product providers from various regions of the world, then ensure that the business models do not cannibalize the use of your (possibly limited) resources. Also, ensure that you are not unintentionally creating a conflict of interest within your own businesses.
- Yes, the saying “do not put all your eggs in one basket” might stand valid here, yet single eggs in separate baskets might not add up to “one big omelette” either if each egg comes from a different bird! 😊
6. Did you visit the franchisor headquarters?
- Too often franchisees depend on secondary or online research of the concept to franchise or even word of mouth in some instances. Yes, the franchisor could have amazing product/service offerings, that could prove very successful in their local markets. But, if you don’t visit the headquarters yourself to get a feel of the full spectrum of the business, then you might be leaving yourself in the dark
- A successful local business does not necessarily translate into a franchisable (international) brand. The way the business is set up in the local market might prove difficult to replicate in another market. The raw ingredients sourcing or the supply chain could be a challenge in other markets. A small/medium enterprise brand that is run by a family in a local market might be diluted when moved across borders. These are all considerations you should contemplate on when visiting the franchisor headquarters
7. Are you happy/comfortable dealing with the franchisor’s (international) operations team?
- If you feel the resistance from the operations team handling the franchising dealings (especially if in different countries), chances are your life as a franchisee will not be smooth sailing after you acquire the franchise. You need not be best chums with the franchisor or their team, but you do need to feel comfortable dealing with them so you would know that your business will be attended to with the same importance that the franchisor’s business is run. If the franchisees are too many, or too diversified, or require too much localization activities, you can anticipate that the franchisor support to you will be sparse, diluted, and possibly ineffective leaving you to fend for yourself. That will not yield a successful or sustainable business for you in the long-term
- Having a professional, and comfortable, relationship with your franchisor facilitates business insights, and you would have access to information that might not be shared “on the record” helping you to maximize the efficiency of your franchised business’ operations and returns. Strive to establish that relationship earlier on in the process
Once again, the above is not a comprehensive list of considerations – but one that would trigger your thoughts on the franchising process and whether you are ready to be a franchisee. You would be investing to build a brand that is ultimately not yours against potential financial returns and accrued know-how, yet you wouldn’t have too much leeway with the business or the brand for you would be obliged to follow the franchisor’s rules and share your returns accordingly.
#Franchising #SMEs #Franchisee #Internationalization #BusinessStrategy
