The best way to explain what is needed and what needs to be done to know
how to franchise a business is to look at its origins. Analyse how their beginnings were, know what problems they encountered and how they were solved.
Several types of totally different and successful businesses were appearing in the market. This fact did not go unnoticed. One day, an investor with a view noticed one of them and thought, why can't I have a trade like that? An authentic income generating machine would "work" in my city? What if I talk to its owner and ask him to explain how he developed it? He would pay him whatever.
We are not very wrong to think that the origins of the franchise and its popularisation came about as a result of several situations like this. Several companies were using this growth formula ( McDonalds , the world's largest one started like this). Then there were others and today there are thousands around the world and belonging to all sectors.
How these pioneers solved the needs that arose. How they did to find more investors (franchisees), can help us describe how a business is franchised.
We have already started with the first. The undisputed fixed rule of the system, we must start, as we have already reflected, from a Successful business and that has the capacity to be reproduced in another environment. If it is not useless that we continue since we will not get anywhere: Franchising is to reproduce a commercial success.
From here, the technique of how to franchise a business requires the following:
- Develop a balanced agreement in which the brand owner and the recruit benefit.
- Properly transmit knowledge about the operation of the business so that it is successful.
- Provide the services so that the future recruit can carry out the activity in the best conditions.
- Integrate new franchisees in the network.
The rules on which the franchise is based are very old. They are based on the distribution of functions between the two parties that form this agreement: Both parties. The first provides the knowledge to exploit a business with Success. The second money and management to make it possible, no matter if we talk about hamburgers, clothes, real estate ..., the formula works in all sectors.
1.- Agree on the parties: The agreement
Let us return, therefore, with our "first investor". He has already contacted the business owner and explained his intentions. In principle the two agree but now comes the most complicated how to shape all this ?. This is where the technique comes in, which requires following a specific methodology. As nobody had done it until then, there were no guidelines to follow and they had to be created.
The investor, future franchisee, makes a proposal to the owner of this brilliant business: As we have said there is already a basic agreement, and our investor asks the entrepreneur to use that brand without interference and for a certain time. In addition, it undertakes to do so in a concrete manner and under the guidelines that are imposed on it. In return you will be paid an amount when you transmit this knowledge and a percentage of sales.
The two agree that, as all such agreements are very relevant, it will be better to put them in writing. Without knowing it, they have just created the exclusive area, the entrance fee, the operating royalty and, most importantly, the agreement. Then come the laws that will regulate and order this process, but the seed is laid.
After briefly analysing this situation we are in a position to affirm that the contract is a specific document of each business and that standardising it and using it indiscriminately does not respond to the spirit of formalising a true agreement between the parties but rather transferring the conditions of a business to another, thereby losing its meaning.
2.- Transmit the “secrets” (know-how) to franchise a successful business
As a result of this agreement, a series of needs arise that must be resolved as quickly as possible. How to make everything go well? The investor needs training, he needs someone to tell him which location is the best. How the establishment is decorated and which suppliers will make it possible.
How it works day by day, what needs to be done to attract customers. What products to sell and how to do it, etc. In other words, you need answers before you even start the business.
To answer these questions, it is necessary to extract the bases of Business Success and create the tools with which to transmit it to third parties. It is the preparation of the package, which enables the reproduction of the business in other environments through the standardisation of its entire operation. All this knowledge is sorted by subject to make them more understandable to the franchisee (product, decoration, marketing, corporate image, administration, etc.).
Logically they vary substantially from one to another and from one sector to another. Not in vain they collect their exclusive experiences.
We must not lose sight of the fact that this documentation is only a tool and not the objective of a project. Success will not be in having excellent manuals, since these are not the key, but in having a perfectly prepared business and structure behind. And this is where we are going now.
3.- Provide services to franchisees: The franchise centre
Once it is in a position to reproduce the business, all needs must be considered. To do this, human resources are needed. But first, it is necessary to define exactly what those needs are and from them to place the responsibility of satisfying them in specific people.
We need an organisation, what is called FBA. It is neither more nor less than the structure through which the creator of the business will enable franchisees to earn money. Through it you will provide everything you need to get it: Product, suppliers, advertising, merchandising, window dressing, training, renovations, etc. Knowing how to properly structure and size this plant is part of the specific technique necessary to franchise a business. In any case, the thermometer to determine the most appropriate structure is to know the needs of the network.
When this first investor appeared, the new franchisor was able to provide him with everything he needed practically alone. When others arrived, he needed to hire people and structure the areas around these needs. The way it works is maintained but the structure becomes much larger. How else would it be possible to open 4 or 5 centres in parallel, with the corresponding needs of each one (orders, training, adaptation, advertising, etc.). It would not be viable without an organised structure.
The franchise centre
Depending on the type of business that is franchised, one or the other will be the services provided by our plant. And the training period to transmit the know-how will be more or less. Our first franchisor provided specific services, but the next and the others provided others. Logically the demands of their networks were not the same and consequently their franchise centres are not the same. A travel agency is not the same as a sportswear business. The needs of these franchisees vary and you have to start by determining what they are and from them organise.
It makes no sense to start backwards. The question is not: How should the centre be structured? But what services does my network need? As soon as we define them we will know how we should structure the network. It should be done in a staggered manner. The structure of it is not the same when it starts (it will probably consist of one person), than when it has 100 or 200 centres; To begin with, it is not necessary to have a large central office, but adapted to the situation of each moment. Otherwise we will be acting incorrectly incurring unnecessary costs. Starting to franchise without having this structure will make the process a complete disaster.
The business is successful and it has been proven. The brand owner has a contract and a solid project. It is known how to reproduce this business in other environments and how to transmit the know-how properly. And there is also a franchise centre (even if it is small) to provide everything the recruit will need. Then the only thing missing is to integrate more recruits so that the results are better.
We have seen that the main means to attract franchisees is the business itself. But today and given the competitiveness that exists, there are more and more actions through the multiple means that the market has already developed to attract investors: Press, Public Relations, Fairs, Database Actions , etc. There are many possibilities but the available budget must be taken into account. Initially the needs are wide and the means are usually scarce, for this reason we have to adjust it perfectly and evaluate which may be the ones that can provide us with the greatest number of contacts, only in this way will we make these actions profitable.
Let's allocate a budget, choose the means properly, and design a development plan that includes not only these, but also the people who will be responsible for coordinating it and achieving the objectives that the chain needs. This way we will be on the right track.
Valuations Franchise a business
Turning a successful company into a franchising company is the result of the demand for an increasingly competitive market. It is also the decision of more agile and imaginative entrepreneurs to respond to the challenge of competitiveness.
It is true that it is one more among the different possibilities of associations and expansion that companies can consider. But it is also true that the settlement and maturity achieved by the system in the business world of our country finds its explanation in the advantages that are proper, and almost exclusive, of the system.
The decision to franchise a business, to convert a company as a brand owner, however, requires all the prudence and objectivity necessary to carry out an adequate self-assessment. It is about taking adequate knowledge of the virtues and defects of our business organisation, of our differential aspects, of our added value, of our possibilities and objectives of growth and of the structural needs that, the growth marked as objective, will require.
It is not necessary to be a great company to franchise
From now on, the idea that a company capable of franchising a business must necessarily be a great company must be discarded. Being a brand owner is not something that depends on the size of the company. It has to do with its organisation and its operating system.
The essential thing is to provide it with a firm foundation. Bases well consolidated, identified and that are likely to be reproduced in the figure of the recruit. If we review the main franchises, Spanish and international, we find a unanimous reality. Each one had as a business precedent a Successful business, differentiated and with a reproducible operating offer and operation.
However, in our opinion, the work and the challenge of the franchising company does not end with the identification of that successful business concept. Even with the scripting of this concept; or the creation of an adequate training and assistance program for future recruits. The great challenge of the good owner is to maintain the success of your business concept.
Conclusions Franchise a business
From our experience, we have had and have daily contact with franchising companies that perfectly understand that the good business health of their network does not depend only, but also, on methods or processes tested and properly transmitted.
The fundamental aspect to franchise a business is to maintain the differential, novel and attractive nature of the business. This requires the company head an effort of continuous contact with the market, with its evolution, with the new sources of competition that may appear, with the preferences set by the consumer, with everything that he did, in his day, than the entrepreneur, before If you are a franchisor, you will be able to define a concept of Success.
The rest, the scripting of the processes, the writing of a good contract, the definition of training and assistance programs, etc., is important. In this regard, the entrepreneur can always count on the help of professionals specialised in the field to advise him.
The essential, to franchise a business, and where the entrepreneur is the main, almost the only, protagonist, is:
- on the one hand, the creation of a business concept capable of being franchised.
- on the other, the decision to undertake an expansion through the system.
If you have a good business, do not hesitate and franchise it. We have shown you the advantages it will provide and how you should do it. It will win you and make us win to others, customers and investors.
