Thinking of franchising your business? 10 things to consider…
Pizza Hut is a well-known franchise with successful franchisees operating around the world. However, eight Pizza Hut delivery units in South Wales have recently been shut down and subjected to claims by staff that they have not been paid since the end of 2016. Pizza Hut has reported that these franchisee delivery units experienced problems with their operations management and were no longer profitable.
All business ventures, including franchising, have their risks. However, if you are considering franchising your business you should consider the following:
1. Is your business franchiseable?
You should consider whether your business is likely to have a large market for a long period of time and whether it will offer a good return on investments to franchisees
2. Is your business model proven?
You should be able to show potential franchisees that your business works in practice. We recommend that you have a pilot franchisee successfully operating for at least 12 months before expanding a network.
3. Is your business model transferrable?
Your business should be able to run in multiple (and different) locations with the same system, brand and quality.
4. Is your brand distinctive?
Your brand should be distinctive and appropriate for a number of different locations. You should also protect your trademarks for the benefit of both you and your franchisees.
5. How will you attract potential franchisees?
This can often be the hardest and most expensive task for franchisors. Options to recruit could include attending franchise exhibitions, newspaper adverts, trade magazines, franchise websites, and franchise brokers.
6. Do you have a suitable prospectus to show to potential franchisees?
Prospective franchisees will need to know all about your franchise and will also want an idea of how profitable it can be. A prospectus is also your opportunity to stand out from other franchise offerings.
7. How will you train your franchisees?
Do you have an initial and continuing training programme for your franchisees? Can you provide them with a support system in case they need managerial, administrative or financial advice?
8. What fees will you charge franchisees?
You will need to make a sensible return but the fee should also be reasonable, particularly when compared against the competition. If it is too high then the franchisee may not see value for their money.
9. Do you have a franchise agreement in place?
If not, you should seek legal advice from a lawyer who is familiar with the complexity of franchise agreements.
10. Do you have a marketing and advertising strategy?
You will need to promote your franchise network, especially if your business competes with other rival companies whose services potential customers may already be aware of.