One way a successful business can look to grow is to develop a franchise model. Franchising is licensing someone to set up their own business under your brand, selling your products or services but with your training and continuing support.
Please download our franchise business guide and application.
You receive payments from the franchisee - usually an up-front fee plus a proportion of sales income. Your side of the deal is to provide on-going support and know-how.
It can be an effective way to create and grow a network of businesses under your name. But equally, it means that your business is in the hands of other people - more so than if your franchisees were your employees.
To franchise your business, you should:
Clarify what you want to achieve. The plan should cover finances and your long-term objectives for growth and future development.
It should contain instructions on how to run your business, according to your own business model. The manual can collate the knowledge and experience behind your business.
Alongside the cost of developing your operations manual, your budget should also cover research, recruitment, support structure, legal fees and pilot operation.
Before you commit to long-term franchising, you can test the initiative by setting up a pilot operation to help you decide whether franchising is right for you.
A pilot operation should ideally to run for at least 12 months to identify any teething difficulties. Any experience gained should feature in the operations manual.
Changes in the marketplace will have an impact on your business and that of your franchisees. An ongoing pilot is an in-house operation that does exactly the same as the franchised business. It will enable you to:
To protect your business, a contract must be drawn up by a solicitor to define the relationship between you and your franchisees. It must take into account:
Your choice of franchisee is critical, particularly in the early stages of a franchise. They can determine whether you succeed or fail. Decide on the skills they should have and create a profile detailing the necessary experience and qualifications.
There are a number of ways to find the right person or people for the job. If you are looking for specific skills, advertising in specialist magazines may be your best option. Otherwise you could try:
You will also need to produce a brochure outlining your franchise system and what you expect from your franchisees.
Your franchisees need to know how you want them to run their businesses and a training programme will show them. The structure of this programme and who runs it are up to you.
It may cover:
Your franchisees will pay an initial fee for the right to set up in business under your brand name and in a specific location. You will need to set the amount, bearing in mind that this figure is not about making you profit.
Your return will come from ongoing fees, which should increase with franchisee performance. You will need to set these charges too, which may include:
In most cases, a franchisee will also cover the cost of establishing the outlet or operating unit at the outset.
Franchisees are far more likely to succeed with support and guidance. A franchise management team can fulfill this role, as well as selecting the franchisees in the first place.
The support staff role varies from business to business, but typically covers:
Usually one member of support staff is required for every five to 10 franchisees, depending on how complex your franchise system is.
Impartial, expert advice can keep your business on track. For a list of affiliated advisers, go to the British Franchise Association websiteVisit the British Franchise Association website..
Specialist knowledge can bring a new perspective to your business. You should:
Your accountant will cover the financial aspects of your business. They can help with business plans and offer guidance to franchisees on what they could expect to achieve from a franchised outlet. Talk to a solicitor for legal guidance around registration of your trade and service marks. This can help protect you and your franchisees.
For clear guidance on franchising, download our PDF on how to franchise your businessPDF, opens in a new browser window. If you want to take things further, our experienced advisers can help you construct a franchise package.
Being able to react to changes in the franchising sector often relies on being able to access financing. Whether you require an overdraft to make the most of an immediate opportunity or longer-term funding to support strategic growth, we have a range of finance options and products to suit your needs.
Lloyds Bank Franchise Team
St William House