When you enter into a shopping mall or a commercial complex almost anywhere in the world, one encounters many familiar shops, fast-food restaurants, clothing retail stores, and service providers of different kinds, mostly with familiar brand names that have attained worldwide recognition. Many of these enterprises usually do not belong to any of the large multinational chains but are, in fact, independently owned businesses of local entrepreneurs. So, how is it that small entrepreneurs around the globe are able to sell the same products, use the same trademarks, and have the same shop decoration and have employees dressed almost identically the same? How are these local entrepreneurs legally allowed to do this? The answer is through the franchising system.
Although franchising as a concept has still not developed into an industry in Nigeria, it is a growing phenomenon of business organization and sales or services distribution world over, especially in the United States and United Kingdom.
While the franchise business model will provide sustained advantage for the franchisor and the franchisee, like a marriage, a franchise relationship can end poorly. A franchise “divorce” may produce long-term problems affecting the parties’ ability to conduct business. As in a dissolving marriage, the franchise dispute often centres on ownership: who gets what? The buyer (franchisee) or seller (franchisor) laments spending blood, sweat, and tears building a business only to have the other party claim title to what was built. At the dispute’s core is a clash over goodwill that frequently exposes glaring inconsistencies in the parties’ understanding of their relationship.
To get a franchise arrangement right, here are 5 recommended steps to take:
1. Quality of Management and its Disposition to Franchising:
Is the management experienced and ethical with a history of financial and personal accomplishments? Again, disposition of management towards franchising is key to success in franchising. It is good to note that franchisees are not employees but business owners who must be treated with respect. A franchisees should be given the required sense of belonging by being reserved the right and opportunity to have their ideas and suggestions heard and implemented where relevant.
2. Quality of Products and Services:
Is there sufficient consumer demand for the company’s products and services, and is that demand established in a way there is future prospect for continued or growing demand for the company’s offering.
3. The commitment of the Management:
The management of the franchisor business is expected to be committed for the long-term. Managing franchisees can be quite demanding and sometimes the franchisee can be provocative. A commitment to managing the franchisee, while showing leadership and focus on building the brand with them is necessary for franchising success.
4. A proven business System:
The business must be operating a business system which it has tested at different market locations and proven. The business must have navigated the learning curve of mastering its products and services; its industry unique demands and the business environment which include the customers, suppliers, staff, host locality etc. The nightmare of the franchisor is to recruit a franchisee whilst still operating an unproven business system.
5. Capacity to Support the Franchisees:The capacity to provide support should be available. Support is determined by the structure operated, which ensures there are enough hands and experience to attend to the demands of the franchisee; it is also determined by availability of sufficient revenue base to provide needed support to the franchisees.
6. Proven Demand for Franchising Opportunities
The intending franchisor should have long been getting request for franchise opportunities from potential franchisees, long before it is actually ready to franchise. Hence there should be evidence of demands from willing franchise buyers with the financial capability to become franchisees.
7. Brand quality and Attractive Corporate Image
Franchise buyers are constantly on the look-out for brands that have attained some level of popularity. They desire a brand with quality image they can invest in with a sense of pride. The corporate image of a business through its branding and promotional materials, signage, look and feel etc., should exude quality and professionalism which are saleable. Of course most people that would patronize a franchisee outlet would buy a known brand over other factors that influence buying decisions.
We at Franchise Business Development Services Ltd will help you understand the intricacies of franchising your business or buying a franchise, depending on your need.