GUEST BLOG: Six steps towards franchising your business

By Paul Teahan, master franchisor, The Interface Financial Group

According to the Irish Franchise Association (IFA) there are now more than 28,000 people employed in the franchise sector, across almost 3,000 franchise units and a multitude of sectors, from hospitality to finance.

Ireland’s franchise industry is booming and is expected to grow sharply over the coming years.

Why the strong growth? Ireland is playing a game of catch up on the USA and UK. On both sides of the water, franchising your business has long been recognised as a proven route to rapid growth, allowing business people to quickly scale their operations under a ‘franchise banner’.

However, becoming a franchisor is not an automatic ticket to success. As with most things worthwhile, it requires a lot of work, time and dedication.

If you’re thinking of franchising your business, here are some steps to help you get set up:

1. Assess your business – is it ‘franchise-able’

While you might run a great business, it doesn’t necessarily mean it will make a great franchise. Be clear on just what your franchise offers and what makes it different to other businesses.

In for The Interface Financial Group’s (IFG’s) case, working on an ‘as-you-need-it’ basis with our clients, coupled with our on-the-ground presence and speedy processes, helps us stand out from everyone else in our industry. Conduct market research to see if there is a demand in other locations for your offering.

Provided there is, then the next step is to check your financials. No one is going to spend his or her hard earned cash and time on a franchise that doesn’t deliver an adequate profit.

An ability to demonstrate strong growth – particularly over a longer period of time – will do a lot to allay franchisee apprehension when you start selling.

2. Know the legalities

In Ireland, there is no single statute or code governing the law in relation to franchising. For the most part it falls under the ordinary principles of contract law, laws around intellectual property, and quite often competition law.

This is important to understand when drafting and negotiating franchise agreements, as the absence of any single governing code means that there is considerable scope for creativity. It’s advisable to consult with an expert when drawing up your contract agreements to ensure the finer details are covered.

Despite the lack of specific franchise legislation, it is worth noting that the Irish Franchise Association (IFA) has its own code of ethical conduct, which all members must adhere to.

3. Decide on a franchise model

The model you select will affect not only the amount of profit you make, but also the level of time and effort you need to put into the business.

Some common considerations on this point include:

• Your franchise fee and royalty percentage
• The duration of the franchise agreement and the renewal arrangements
• The size of each franchisee’s territory and what this will be based on –population size, geographical size, etc.
• The geographic area you wish to offer franchises within, i.e. just Ireland, Europe, globally?
• The type and length of the training programme you will offer
• Ongoing support and training for franchisees
• The business experience and net worth franchisees need
• Marketing for the franchises

Furthermore, regularly meeting with individual franchisees and groups will demonstrate your support for them and give you the opportunity to show them that you’re working hard to make their offering better

It’s important to get these factors right at the beginning. For example, while it might seem like a better idea to charge a larger franchise fee and a smaller royalty when you’re starting out and you only have a couple of franchises, that could prove very costly 10 years down the line when you have 100 franchisees.

4. Detail your processes

The most successful franchises are those that can take a proven business model and recreate it time and time again. In order to do that you need to analyse every aspect of your business and document each process, from accounting practices to registering new customers.

It is incredibly important that all franchisees adhere to your practices and processes. Sure you can allow a bit of wiggle room, but if franchisees begin ignoring key elements, then they’re no longer implementing your proven model.

At best, such deviation can lead to inconsistencies in the brand and, at worst, failure of a franchise. For this reason, serial entrepreneurs often don’t make ideal franchise candidates as they struggle to stay within the boundaries of your processes.

It’s up to you to decide just how stringent your processes will be and where, if at all, you allow for a bit of entrepreneurial flair.

The whole aspect of getting these details in place revolves around, can the proposed franchise business process be written down. Can you create a manual from that written description?

This is often the base ‘franchise test’ as to whether or not your business can, in fact, be franchised. If it cannot be written down and understood by a third party, then maybe it doesn’t pass the test and is not ‘franchise-able’.

5. Start selling

Probably the hardest part of running a franchise is selling it, due to the high risk involved. After all, you’re asking people to make a large financial investment, most likely quit their jobs and start running a business in an area they very often have never worked in before.

Thankfully there are numerous ways you can get your brand in front of potential franchisees. Trade shows, such as The Franchise Show, which takes place at the RDS in September, are a great way to engage with an actively interested market.

Be aware though, a stand at these expos doesn’t come cheap. Other than that, there are many franchise directories, along with industry bodies like the IFA to help you find leads.

Your biggest job is to help potential franchisees overcome their apprehension about investing in your organisation.

Some of the best ways to do that include:

• Disclosing your organisation’s financial performance so they can see they’re buying into a system that works
• Demonstrating longevity – your franchise must be doing something right if it’s still in business. For example, IFG has been in operation for more than 40 years, which has allowed us to build a strong reputation and a lot of trust.
• Encouraging potential franchisees to speak to existing and past franchise owners so they can get a real feel for the business and not just a sales pitch from you.
• A ‘doing it yourself’ – or at least have a solid history of having done it in the past – track record is a key element in the sales process.

6. Support your franchisees

Paul Teahan

Ultimately, the success of each franchisee is in their own hands. However, it is important that you continue to support them beyond the initial training and induction stage.

An open door policy, that gives franchisees the opportunity to ask questions about anything they’re unsure of and offers advice willingly, can be invaluable.

Furthermore, regularly meeting with individual franchisees and groups will demonstrate your support for them and give you the opportunity to show them that you’re working hard to make their offering better. It also helps ensure they’re sticking to your organisation’s processes.