Franchise Consultant Graham Mylchreest answers the most common question business owners ask about franchising
I speak to a lot of business owners, many of whom are relatively new starts and most of whom are enthusiastic, energetic and in search of growth. The most common question I get asked is, “Can I franchise my business”?
Before I answer that, it is worth looking at some facts and key statistics for the UK franchise sector. The British Franchise Association and NatWest have been surveying the UK franchise sector for over 30 years and reporting constant growth year on year. The latest survey covering 2018 showed some really interesting results.
The highlights include:
• The franchise sector contributes £17.2 billion to the UK economy
• It employs 710,000 people
• The number of franchised units is now at 48,600
• A staggering 6 in 10 franchised units turn over more than £250,000
• Franchisee commercial failure rates are reported at less than 1%
• There are more than 900 brands franchising in the UK, in almost every sector!
So, when business owners ask “Can I franchise my business”, the answer is most likely “yes”.
However, there are some caveats we need to add to that before we storm ahead and start offering franchises for sale.
Why use a franchise consultant?
Professional and suitably qualified franchise consultants will take the business owner through a series of procedures that ensure the business meets the criteria for ethical franchising. Any honest business person would agree, that it is unethical to ask potential franchisees to invest in a franchise concept that cannot demonstrate profitability, right?
So, before you have the right to sell franchises, you need to be able to satisfy at least four basic criteria before franchising your business. The criteria are:
1. Is your existing business profitable and can you prove it?
2. Is your business sustainable? Will there still be a market for your products and services in the foreseeable future?
3. Is what you do transferable to others without specialist knowledge, skills, experience?
4. Is your operation fully disclosed? Investors have the right to know of any factors which might influence their decision to buy into your concept.
When you think about it, these are the most basic due diligence questions to be answered before investing in any business – franchised or not. However, ethical franchising confers greater responsibility on franchisors (the owner of the concept), than simply selling a business. As a franchisor, the concept owner also assumes the role of mentor, advisor, motivator and policeman to the new franchisee, amongst other things. As a franchisor you also have the duty and responsibility to develop the business, products, services and the brand on behalf of your (franchise) ‘investors’ who will look to you for guidance, leadership and inspiration. Their job is to follow your system(s) and deliver the products, service, values and brand integrity that often makes franchise brands perform better than corporate equivalents. After all, the franchise owners have a vested stake in making it work.
Moving from Business Owner to Franchisor
Owning and operating a successful franchise business therefore, requires a different set of skills, abilities and duties to running a single outlet business. No longer are you responsible for delivering the product and/or services, your role as franchisor is to supervise, control and lead a disparate collection of business owners to meet your exacting standards, procedures and policies, to deliver the business objectives with the same enthusiasm, energy and values that have made you successful.
So, when someone asks “Is my business franchisable”, the answer depends on more than just the financial performance of the original concept. We need to answer all of the questions above and understand the role, abilities and attitudes of the franchisor, before we can get close to answering that apparently simple question.
Of course, seasoned franchise consultants have tools, techniques and tips they can use to answer the questions and guide owners to become strong franchisors capable of developing and running a successful franchise network. In all honesty, I think it also helps if the consultant can demonstrate success themselves as operators in the franchise sector. Some of the issues, problems and even opportunities are difficult if not impossible to teach, never mind foresee. It makes sense therefore, to choose a franchise consultant you feel comfortable working with and who shares the same values and love of your brand that you do.
Notwithstanding all of the above, franchising is a growing, successful and contemporary method of expanding a good business to achieve scale, brand recognition and domination in your chosen sector. It can be much faster and cheaper too than organically growing, as you leverage franchisees money to grow the network and invest in brand and product/service development. Oddly, too, from personal experience, it can often be achieved with fewer personnel, as long as their roles are clearly defined, focused and carried out with common commitment to a well thought out and communicated strategy and central plan.
Franchising your business might not be suitable for everyone. But against the political and economic challenges currently being experienced in the UK through Brexit, an unstable government and an uncertain business landscape, replicating your current success across the UK offers many businesses a shield from the external factors that cause huge concerns.
If you are serious about growing your business and building your brand, you should at least consider franchising as a viable and proven option. Usually franchise consultants will offer an initial consultation for free and many like us, can even help you access grant funding and preferential borrowing terms.
About the author:
Graham Mylchreest is Managing Director of Be Franchising, the UK’s only not for profit franchise consultancy and is affectionately known as The Franchise Guy™.
Graham has worked at senior level in a variety of successful UK franchise companies and served as a franchisor board member for the British Franchise Association for almost 10 years, prior to moving into franchise consultancy. You can contact Graham on +44 (0) 7507 843547 or email [email protected]; www.befranchising.com; www.infinitybusinessgrowthnetwork.co.uk/consultant/graham-mylchreest/; https://www.linkedin.com/in/graham-mylchreest-the-franchise-guy/