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In
this section of Franchisee Wanted.Com, we have some points, which may
assist and guide you as means of growing or expanding your business (for
the franchisors). We
hope you will find these points as guidance for your business.
Guidelines for franchisors to expand and grow their business through
franchising:
(A)
Franchising is a system of business expansion.
(B) Success is not guaranteed.
(C) 5
Steps to expand your business through franchising:
(1)
Well-defined criteria and marketing plan,
(2)
Set a pilot franchises,
(3)
Develop a franchise package,
(4)
Develop a franchise operating manual,
(5)
Arrange adequate funds.
(A)
Franchising is a system of business expansion :
Though
in the previous decade franchising has gained attention of businessmen and
entrepreneurs. Through franchising the growth of business is inequitable
because of its simplicity.
There are two main benefits of expanding business through franchising; one,
it requires low capital investment by the franchisor because the capital
used to expand the business network comes from franchisees, two, by franchising
the business, the franchisor places the expansion/growth of his business
in the hands of people (franchisors, dealers, distributor and c & f agents)
who are motivated to make it a great success. A rapid expansion/growth can
be achieved by using the franchisors' capital. Therefore, the franchisor
can establish a large number of outlets without incurring the overheads
and costs required for opening of company owned outlets.
The cost of expansion/growth for the franchisor is generally limited to
the cost of recruitment training and assistance to the franchisees. For
running of franchise business, franchisors invest their own and borrowed
funds. Due to less capital employed, the return on investment is much higher
for businessmen who expand their business through franchising. In franchising,
there is less requirement of employee, therefore fewer expenses and more
profits. The franchisees are more motivated and effective than salaried
employees because franchises have a vested interested in the business.
Certain criteria must be followed before embarking on the franchise route
of business expansion/growth.
(B)
Success is not guaranteed:
No business
planning, method or consultant guarantees success of business and franchise
business is no exception. If the franchise business involve a proven product
or service with a well recognised brand name, sufficient fund with hard
working, the chances of success are very high. On the other hand, if funds
are not sufficient, product or services is not tested properly, there is
no brand name and franchisees, dealers, and distributors not trained properly,
the chances of failure are more.
(C)
5 Steps for expanding your business through franchising:
Franchising
must be based on careful planning and preparation. The steps for expanding
your business through franchising may include the following steps: -
(Step-1) Well-defined criteria and market plan
:
- The
product or service offered must have long term market potential.
- The
franchisor's identity, image and name must be clear;
- The
franchisor must ensure that there is sufficient margin in the business.
- The
franchisor must ensure that he is ready to provide on-going support
to his prospective franchisees, dealers, distributors to assist and
encourage them to develop their business and to improve its own all
performance.
- The
franchisor must have a good proven track record.
(Step-2)
Set a pilot franchise:
Pilot franchise means a franchise outlet, which can be shown as an example.
The franchisor must set a pilot franchise. By pilot franchise, the franchisor
can prove the viability of his franchise concept and system. As far as
possible, pilot franchise must be company owned. Through pilot franchise,
the franchisor can demonstrate and prove that he has operated that business
profitably and successfully.
The pilot franchise enables the prospective franchisees, dealers and distributors
to assess the requirements such as the type and size of location, the
equipment required, the operating methods and marketing and financial
requirements.
(Step-3) Develop a franchise package:
In the franchise package the franchisor defines the structure of the business
format and the nature of he relationship between franchisor and franchisee.
This franchise package is generally documented in the form of an agreement.
There are different franchise packages for different franchise businesses.
The following elements may be included in a franchise package:
- Use
of the franchisor's trademark, logo and name :
In
franchising a franchisor gives franchisees the right to use his trademark,
logo and name for the defined business. Therefore, it is important that
the franchisor has undisputed and clear rights to them and has taken
care of all protective measures to protect them before allowing others
to use them.
- Territory
right:
The
franchisee generally buys an area, territory or city where he works.
The franchisor designates to the franchisee the exclusive rights to
operate in a particular area, territory or city within such area, territory
or city no other franchisee will be allowed to operate.
- Training
:
Generally, the franchisees do not have experience in the business of
the franchisor. To operate the business successfully the franchisor
should provide franchisees the required knowledge through training.
-
Accounting procedure:
This is a key element in the franchise package. In a franchise package
it must be clear that how the accounts to be kept, how the franchisor's
fee or commission to be calculated.
-
Marketing strategy and advertisement materials :
Franchisees
expect that the franchisor will develop a marketing strategy and activities
as well as the franchisor will provide advertisement material.
- On
going supports and training :
Franchising is a very long-term relationship between franchisor and
franchisees. On going support and training is a very important element
of franchising package. On going supports and training include general
business advice, new opportunities, regular meetings, motivational seminars,
monitoring the performance of franchisees and regular training.
(Step-4)
Develop a franchise operating manual :
Operating manual of a franchise contain, in written form, the complete
method operating franchise business. The operating manual is also a part
of the franchise agreement, defining and explaining the manner in which
the business must be operated. In other words, we can say that operating
manual is a guideline to operate the franchise business.
There is different operating manual for different franchise business.
The following points may be included in the operating manual: -
-
Introduction: Introduction explains the nature of the operation
and what the franchisor and franchisee expect from each other.
- Equipment:
The details of equipment required operating the franchise business,
their quantity, how to use them and what to do where problems arise.
- Operating
instructions: Operating instructions can be divided into
various part such as sales, customer services, advertising and production,
price and purchasing polices, inventory management and payoff of fees.
(Step-5)
Arrange adequate funds :
When you decide to expand or grow your business through franchising, one
of the biggest abstains the added cost and level of funding required at
the initial stage. Therefore, you should give full consideration to the
following cost items: -
-
The pilot franchising: The franchisor must have operated a pilot
franchise before franchising the business. Therefore arrange adequate
funds for this operation.
- The
franchise package and operating manual: A thoroughly prepared franchise
agreement and operating manual must be prepared before commencing franchise
business. For this funds are required to hire a lawyer or consultant.
-
Advertisement material: You should arrange adequate funds for
providing advertisement materials to your franchisees.
If
all the above are setup, now you are ready to expand grow your business
through franchising. To assess yourself and your franchisee our checklists
may be helpful.
Go
for it, all the best from the entire team of Franchisee Wanted.com
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