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To franchise or not to franchise?

by OnDeck Australia,   Aug 29, 2019

 

 

So you’ve got an established business that’s thriving, with a robust business model, a strong brand, and you’re ready to grow. It’s only natural that franchising your business will arise in the process of scoping your options to scale up. And rightfully so!

Franchising can be a great way to grow your business as it requires significantly less capital from you to open new locations.

It can also be an easier way to scale up fast as your franchisees do a lot of the leg work in recruitment, training, sourcing, managing leases, utilities and much more when opening new unit locations.

Sounds appealing, right? Here are a few things to consider before deciding whether or not to franchise:

 

1. Think about your relationship with your customer – do you want it to change?

There are many things that change once you franchise, but one significant change often gets overlooked. When you begin to sell franchises, your customer changes from direct consumers to your franchisees. This shift is often a welcome change to business owners, but plenty of people built their enterprises because of their love of direct customer interactions.

Shifting from a B2C business to a B2B enterprise can be very challenging for those who still enjoy the daily operations of their industry. Franchising comes with it a substantial increase in legal, administration, process and systems-based activities rather than front-line sales or service.

 

2. How much is your company culture and values a part of the brand – and can that be replicated?

Have a good think about how much your company culture and values influence the business brand and success. It’s common for highly successful and stable business models to owe significant parts of their appeal and success to the people who work in it. A great way to find out if this applies to you is to survey your customers to gain insight into their value drivers and why they purchase or engage with your business.

If it’s product and service quality – excellent, stay focused on documenting and replicating these aspects. If you discover that your staff and community are a large part of the appeal, consider if these elements can be replicated. Some aspects of business culture can be captured in the brand and value strategy. However, it’s important to remember that you have less control over recruitment and staffing in your franchises.

 

3. How geographically targeted is your business and will it translate into different locations?

Consider how specific to your geographical location your business is. For some companies, such as the classic coffee shop or bakery franchise, geography is rarely an issue. However, for other businesses with products that are specific to a particular climate, terrain or demographic; moving the business model to a new location can have a big impact on its success.

Ask yourself how much flexibility your branding and product has to adjust to local markets. If you don’t already have a second location consider opening another store, or at the least go through the exercise of planning to duplicate your model. If you begin the process of planning a second location and realise your model needs lots of adjustments to adapt to local markets, then perhaps your business isn’t suited to franchising or needs some changes to make franchising feasible. If you do have multiple locations and they are operating consistently regardless of different geographic factors this is an excellent sign your business is fit for franchising.

 

Do you have the right systems in place to scale up?

Maintaining brand and business continuity throughout franchises primarily comes down to your systems and processes. Consider what methods you have in place for reporting, finance, marketing, stock take, recruitment, etc. The tighter your systems are, the more likely they’ll be able to be replicated to the next franchisee, providing them with a higher quality business model. Ensure you have all of your systems and processes documented. This can be a tedious job but is absolutely vital. It can be worth investing in a contractor to help audit your operations and help create the right documents for hand over.

 

Can you exercise quality control?

Out of all the systems you should try to perfect, quality control should be top of the list. It sounds obvious but quality control can be a difficult task considering everyone has a different level of standards. What you might think is low quality your new franchisee might think is perfectly acceptable or even high quality. If your team’s discretion has a large part to play in your quality control, start working toward a systemic method to ingrain quality control checks into multiple stages of your processes. Think about how you might be able to automate some of your business activities, or include specific equipment brands, or branded ingredients to ensure you’re creating a consistent product or service.

If you feel confident in all of these areas, franchising could be a great way for you to expand your operation and begin evolving your business into an empire. Remember, while franchising can be a cheaper way of scaling your enterprise, it’s still essential to invest in legal and marketing support to create an appealing package for potential franchisees.

If you’re ready to franchise and think OnDeck can help you with a short-term business loan to give your expansion a head start, submit an enquiry today or call us on 1800 676 652.

 

 

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