ADVICE FOR FRANCHISORS

products or service, systems, and administration This method is usually known as business-format franchising

As a franchisor you will:

● Allow franchisees to use your trading names, logos, business style and format.

● Help franchisees establish their own businesses to a pre-determined format.

● Provide continuing training and support to enable franchisees to operate and develop their businesses successfully

If you are planning to franchise, you should already operate a successful business with a good track record and have sufficient management and financial resources to develop and support a franchise network

The advantages

● You can achieve faster business growth without large-scale capital investment because each franchisee will finance their own business

● You can quickly grow the number of outlets under your brand, distributing your products or supplying your services.

● Instead of high numbers of staff and managers for a wholly companyowned operation, you would have only a small head office with a few highly skilled staff to support your franchisees.

● Franchisees invest their own money in their new business, so they are more likely to be highly motivated, and keen to minimise costs and maximise sales

● As they are running their business locally, franchisees will often have considerable local knowledge and may already be involved in local community life, which is likely to help the business

● Franchisees are responsible for financing and maintaining their units and for the employment and management of any staff

The disadvantages

● Developing a franchise network can be expensive at the outset, both in terms of management time and capital outlay

● Your investment won’t be recovered until franchisees are appointed and you receive initial fees and then a regular income from them as their businesses grow

● You receive only a part of the profit made by the outlet, instead of all the profit if they were owned by you.

● Franchisees own their own businesses so you need to persuade and influence them rather than issue instructions as you would to your own staff Communication and people management skills are vital for franchisors.

● To protect your brand and company reputation you need to monitor not just the sales performance of each franchisee, but also their quality standards and customer service as well as brand standards

● Some franchisees may cause you difficult issues as you grow They will gain in-depth knowledge of your business through your support and training and may subsequently try to use it to set up as competitors Some may try to reduce the amount they pay in management service fees by not disclosing all their income

● Therefore, recruiting the right people and having a rigorous vetting process is vital You must also be sure that the people you select as franchisees can accept the responsibility and stress of running a business

Where to start

The first step is to find out more about franchising and see how you can use the experiences of others to avoid mistakes

Contact the BFA as they have a wealth of experience and offer franchisor training and support

A visit to a franchise exhibition will be a good introduction to the sector and you can attend the free seminars, hearing from professionals in the market

Think about appointing a franchise consultant to help you put your franchise operation together I recommend that you use a BFA-affiliated consultant, speaking to two or more to ensure you chose the right one for your business.

The next big step is to set up one or more pilot operations – a vital ingredient in creating a franchise that will have a long-term future The benefits of the pilot units are:

● They will demonstrate whether the business is viable on a stand-alone basis.

● It will enable you to identify any problems and put them right Franchisees, who have parted with their hard-earned savings to buy your franchise, expect to receive a tried and tested format in which any difficulties and problems have been ironed out.

● Part of the pilot process is to put together a comprehensive operations manual This will be one of the methods of ensuring that franchisees follow your systems and procedures

● The pilot will give you a better idea of how much the setting-up costs for the business will be, what sales are required for break-even, and what level of profits franchisees could expect

The franchise agreement

Again, I strongly recommend you use a BFA-affiliated specialist franchise lawyer to draw up your legal contract This important document will set out the terms under which you are selling the franchise, your obligations, and those of the franchisee It must accurately reflect the promises you have made in your franchise prospectus and marketing material, and it should be fair However, it also needs to include the controls that are necessary to protect both you and the franchisee.

Preparing for launch

When the pilot is running successfully, you will be ready to prepare for the launch of the franchise These are some of the things you will need to do:

● Prepare a prospectus to attract suitable franchisees This should give clear, concise, and accurate information about your business and promote a strong company image Be careful with any claims of income and profits, these should be backed up with the results from your pilot operations You do not want to bring people into your franchise with misleading information.

● Make sure you have plans for a comprehensive training programme for your franchisees You could include practical experience for them in one or two of your outlets/stores or with your own staff.

● Consider whether you will have sales areas or territories for each franchisee, this is usual with many franchise operations to ensure that a franchisee knows they can grow their business within set boundaries

● Decide how to calculate the initial franchise fee, management services fees, advertising fees, mark-ups, and any other payments that the franchisees will be making

● You may need to prepare projected cash-flow forecasts and profit projections, based on your pilot operations, taking care not to promise that franchisees will reach specific profit figures

● As mentioned earlier, you should prepare a comprehensive operations manual, covering all aspects of the day-to-day operation of the business

● Consider applying to join the BFA It has established a code of business conduct for its franchisor members and is a source of information for both prospective franchisees and franchisors

Recruiting franchisees

Bringing in suitable franchisees will be key to your success as a franchisor so ensuring you recruit people with the right skills and attitudes is vital The reputation of your business and the future of your franchise network could be at stake

Spend some time at the outset thinking about what will make a good franchisee in your business Will they need sales skills, is there particular technical expertise they need, what experience and attributes will help them to be successful? Plan your interviewing/ vetting procedures to ensure that candidates have these skills

Don’t rush this part of the process When you launch your franchise, you will be keen to get things moving as quickly as possible, and to start recouping some of your initial outlay However, if you lower your standards and recruit the wrong people as franchisees, this will lead to problems in the longer term.

Popular recruitment methods include leads from your own website, exhibiting at franchise shows, advertising on specialist websites, and in franchise magazines and trade magazines covering your business sector – a mix of all, or several of these.

Franchisee finance

Depending on the start-up costs, franchisees will probably need to borrow to buy into your franchise and will have to put in some cash as well In the early days of your franchise operation, banks will probably lend around 50 per cent of the costs, but when your franchise network is well-established with a good track record, franchisees may be able to borrow up to two-thirds of the costs

There are several banks with specialist franchise departments and if you provide them with information about your franchise network, they can begin to build up a profile of your franchise This is used to support lending managers when they are considering a request for finance from one of your franchisees and means that the bank will have a better understanding of the business

Franchisees will need to prepare a business plan, together with financial forecasts to support their request for finance. You will probably need to help with this, but the franchisee should understand the figures and “own” the business plan n

Bringing in suitable franchisees will be key to your success so ensuring you recruit people with the right skills and attitudes is vital The reputation of your business and the future of your franchise network could be at stake.

GONG CHA, a fast-g rowing global bubble tea brand, has announced the opening of its 13th UK store located in Brighton, East Sussex

Founded in Taiwan in 2006, Gong cha says it is known for its consistently highquality, freshly brewed drinks made with premium ing redients

Gong cha f irst expanded overseas in 2009 and has since g rown to nearly 2,000 stores in 22 countries including the U S , Australia, Canada and Mexico

The new store in Brighton follows a period of strategic prog ress for Gong cha in the UK says the g roup, building on its existing network of stores in London, Leeds, Liver pool, Manchester, Newcastle and Nottingham

Paul Reynish, global chief executive of Gong cha, said: “We’re delighted to launch our latest store in Brighton, expanding our presence in the UK to more than seven cities

“As one of the UK’s favourite destinations, our opening in Brighton is another oppor tunity for us to showcase the strength, relevance, and adaptability of Gong cha’s world-class brand and offer It also presents a unique oppor tunity to introduce consumers across the countr y to the joys associated with bubble tea ” n

To learn more www.gong-cha.co.uk