Time and again franchising out-performs other start-ups
The franchising industry can sometimes be seen as one of mystery to many.
The franchising industry can sometimes be seen as one of mystery to many.It is a term misused on a regular basis and one that many therefore misunderstand.
So what is really meant by franchising and what does it mean to you as a business owner?
The formation of the British Franchise Association (bfa) in 1977 marked a significant leap forward in the industry and its approach and responsibly to provide a professional, ethical and subsequently very successful industry.
Set up to accredit and promote excellence in franchising, the bfa accredits franchisors based on a code of business practice and the European Code of Ethics for Franchising.
As a result, franchising now encompasses a multitude of business types and consumer markets and has well established itself as a respected and highly regarded business model.
So what defines a business as a franchise?
Business format franchising can be explained as the granting of a licence by one person (the franchisor) to another (the franchisee), which entitles the franchisee to trade under the trademark/trade name of the franchisor and to make use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business and to run it with continual assistance on a predetermined basis.
Time and again, franchising has greatly out-performed other start-up businesses. Its formula of a locally-owned and run enterprise, driven by a small business owner, with branding, economies of scale and support from the wider network, gives the consumer the best of both worlds and the business a far better chance of success.
During 2008, while many businesses struggled with the economic downturn, many franchise businesses were finding that they had an increase in the number of enquiries to buy into their brands.
The reason was that as a proven business model, and one that weathers well in economic difficulty, increased numbers of people were turning to franchising as an attractive new career.
So why doesn't everyone franchise their business?
Well despite its inherent successes and strength, there are some key considerations to make.
The business not only needs to be proven to work, but it also needs to be transferable to allow potential franchisees to run the franchise as a business elsewhere. There is also the fact that it needs to be a business that you can teach people to replicate in accordance with your system.
Although expansion through franchising can be cheaper than organic business growth, it still isn't cheap. There are a lot of up-front costs such as having proper franchise agreements written up, producing detailed operations manuals, adapting the structure of the business, marketing, recruitment, and the list goes on.
To franchise a business properly, it takes a lot of investment and effort.
The bfa has a list of accredited professionals, such as banks, accountants, solicitors, media and consultants, that can help you set up you business for franchising. This expertise needs to be gained somehow. In reality, if you are just starting in franchising, you will need to gain the expertise from outside and this means additional costs.
A franchise network needs continuous investment and support. You will need to develop the brand, provide training, provide technical and business support, deal with disputes, and account manage the franchisees' own commitment and enthusiasm. All of this takes time and money and you need to be committed and dedicated to this task. Without this support you set up your network to fail.
Franchising continues to be a successful and well respected business model, but it must be utilised correctly. For more information on franchising, the European Code of Ethics for Franchising and education resources visit www.thebfa.org
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