How to Turn Your Business into a Franchise
Franchise Business
Before addressing the main subject, let us have a look at the definition of a franchise again. A franchise business is a business that gives rights to an entrepreneur to use his trademark and to replicate his business model in another location for a franchise fee and pays royalty fees on the sales. Now, let us see the reasons, a businessman would want to sell or buy a franchise. A franchisee is willing to pay a fee to replicate the business because the original business model seems lucrative and the brand also has a significant brand value that can attract customers. A franchisor is willing to license the trademark to a franchisee because he can earn a lot from franchise fees and royalties. In these transactions, it is easy to see that the value is in the brand, brand identity, and the franchise business model. It implies that brand and brand value are very important to expand the franchise business. Whenever a business is ready for expansion, an initial introspection is needed to verify if there is enough brand value and also with respect to many other aspects. The following factors become very essential to a business that plans to expand through the franchise route.
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Business model
Business Model
The business model needs to be very well defined before it can be replicated in another location. The business model includes each and every detail such as product, service, operations, safety, accounting, investment, training, marketing, branding, trademarks, supply chain, customer care and reinvesting into the business. In a standalone business that is managed by an owner, too many things rely on the owner’s discretion and business acumen. When a business is to be run in the
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same manner by another person, he will need clear instructions to follow. Look at your business and try to put down each and every detail into a fixed and replicable procedure. If there is anything that is not definable clearly, focus on it and arrive at a clear and concise direction. Once you have defined a few of the previously undefined aspects of your business, try to implement them yourselves for some time. If you are able to implement successfully in various situations, you are on the right track. If not, you will have to find alternatives and repeat the process until you arrive at a satisfactory outcome. Refining a business with many such iterations will take some time before you arrive at a convincing business model that can be used for the franchise format of business. Manual Try your best to develop a manual to run the business in the same manner as you do. All the relevant instructions should be written down clearly. It should not leave the scope of any confusion at all. If you think that some things are to be left to your discretion, then, say so clearly in the manual. The manual should be concise, well organized, and easy to follow. Brand The entire franchise value of your business lies in the strength of your brand. There will be any scope of selling a franchise only if the buyer is getting a brand that is already accepted by the market to at least some extent. The brand identity can be worked upon and even analyzed for adaptability in other locations and markets with different demographics. A wider section of the market should be able to relate to the brand values if the brand is to be launched on a large scale. The branding has to be very specific. If the brand is to compete on a national level, it is to be kept in mind that the branding has to ensure that it is recognized and preferred from hundreds of businesses vying for the customer’s attention. Ensure that all the trademarks that you use are registered and owned by you. If there is any litigation regarding patent products, intellectual properties, and trademark, try to settle the case at the earliest.
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Location If the franchise business is new to you, try to pick a location that will be convenient for you. It should be far enough so that you do not compete directly with the new unit. Nor should it be so far that you are not able to visit it frequently. A new, and more so, a first franchise outlet will require your frequent attention to solve problems and fine-tune the operations. You should have a proper understanding of the new market. It is largely the job of a franchisor to ensure effective marketing. If your product or service is such that it requires you to supply the processed or semi-processed products, you will have to bear in mind the cost and feasibility of supply chain management. The choice of location has to be very strategic. Franchisee A business should not sell franchise units for a new location just because prospective franchisees are willing to pay for it. A deserving and willing candidate is not so easy to come by. There are many businesses turning to franchises now and all are looking for an entrepreneur with the right attributes. The right candidate will have the right approach, experience, background, and be financially sound enough to make the investment and carry on until the business becomes profitable. A franchisee should be cooperative, patient, and enterprising with a personality that is conducive to leading a team. Law It is absolutely important to discuss all the implications of licensing a franchise with a lawyer specializing in business laws and franchise documents. India does not have specific franchise laws and it makes the agreement all the more complicated. Explore the entire scope and limitations to be enforced while entering an agreement to license the use of your registered trademarks.
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Expansion strategy Once you have achieved success in your initial business, there will be multiple avenues to expand. You will have to explore all possible routes before finalizing franchise as the best route. You have to decide how you will arrange for the cost of marketing, supplies, training, and other support to be provided. It will not be unusual for investors to come forward to fund the expansion strategy you chose. Consider these investors carefully because they can start pressurizing you later on to change your strategy. The best way is to opt for organic growth and wait till you have reached a point where you can divert your profits back into the business. Budget Converting a business into a franchise business requires a lot of marketing. Here, you are supposed to be targeting seasoned entrepreneurs who will see through inefficient marketing. Since you cannot compromise on the quality of marketing, you will need a budget laid out especially to acquire franchisees. Other fees like legal consultation and registration of intellectual property are costs for which you need funds to lay by. Even once a franchisee is acquired, a budget is needed for various costs such as training and marketing. Plan out ways to meet this cost. A budget is necessary in order to ensure that you spend only in proportion to the benefits that you stand to gain from that expense. Though it seems like an ideal way to grow by issuing franchises, it involves a lot of work. Begin by working out the details and you will soon realize the weaker points of your business that need attention. If you feel daunted by the nitty-gritty of refining your business model, marketing your brand, branding, and reaching out to potential franchisees, approach one of the franchise consultants at Frantastic. An expert will help you to define the investment cost and brand and also help you in marketing the franchise through their knowledge of the domain.
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