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How to Franchise: Franchising allows you to do something which is otherwise very difficult to achieve: grow rapidly your business and raise cash at the same time. It also an ideal way to exit from a large business with difference products or locations if an outright sale is difficult to achieve or a constant ongoing return is preferred. There are many franchisors available so how to franchise and be successful at it? Spotting the Franchise Opportunity Many experienced and successful business could expend their business by franchising it. In fact franchising could be an option to dispose of branches if outright sale is proving difficult. A new franchisor needs to have something better to offer than the existing franchisors. This does not need to be a whole new business concept. You need to research the market, obtain information on your competitors who are already franchising and come-up with a better proposition. The basics of franchising When franchising you are most likely to give your franchisee access to your knowledge and trademarks, therefore the first thing you need to ensure is that your intellectual property is correctly protected by registering it. Once you have registered your intellectual property you need to consider how you will are going to run your franchise business: will you give franchisees a territory, what size does it need to be to be successful, will you give them a segment of the market, how do you define it, how many franchisors do you want to have, how many can you support without impacting your own business in a negative way? Once you have a business and financial plan, you need to think about how you will ensure your franchisees will pay you the franchise fees due. This is where a mixture of financial and forensic auditing skills are indispensible. Only then are you ready to get the legal paper work done by a qualified solicitor. Now it's time to prepare a marketing and PR campaign and attract the best franchisors. As with many businesses you need some success stories or case studies to attract other people interested in starting a franchise business. Growing the franchise and being profitable A franchise should have a much better survival rate than any other normal business because of your guidance and support. This is what the franchisees will pay for. So how much can you ask for the use of your intellectual property, the training they receive and ongoing support? Some well know franchise businesses such as Subway start at £7,000 excluding set-up costs and others ask for much more. Franchise fees for ongoing sales made are typically 6% -10% of net sales. How you define the franchise services in the contract will determine your yearly profits and taxable income so involving a qualified accountant who has relevant experience will prevent headaches later on. Leverage the purchasing power of the franchise business in anything your procure from products to services. Once you are established and the model has proven itself help your franchisees by providing loans to procure the franchise. Leverage your network and share what works best between your franchisees, create an intranet for your franchisees and an extranet with your suppliers and other partners. A great way to monitor how your franchisees are progressing and delivering their business plan is in your interest so make sure you get insight in their business. A good way to do this is to force your franchisees to use an online accounting, customer relationship management tools which you can have read access to. Act if they need encouragement starting a franchise is hard and has it's ups and downs, something you should know about as a successful entrepreneur. The exit As with any business you need to think about what you are going to do with it. Are you going to keep the business until you retire? Is your planned retirement age 40 or 65 or 75? Does it make more sense to sell the franchised business and what to you need to have in place to achieve this. This is a question you should have answered in your business plan and be clear about when starting. Ready to start franchising? Let us help you develop your franchising business: 1. Help you spot and refine the franchise opportunity 2. Work with your to build a credible franchising business plan 3. Support you from a finance, tax and accounting perspective 4. Ongoing support for the whole franchise network |
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*1 All quotations and offers are subject to contract and client acceptance procedures as required for regulatory and legal purposes fees quoted on this website apply for small companies, defined as per the companies act.
