The aim of this lesson is to give you the tools to assess if franchising is right for your business and

give
you the benefits and obstacles that franchising a business can entail

My role is to give you the basics of what franchising is and later on, I’ll be putting the meat on the bones.
There may be some elements of repetition during the next lessons but that’s just because some of the
points are really important and we’ll all be looking at it from a different perspective.

First of all, what is franchising?

In business format, it is a simple relationship between two parties. The franchisor who owns the brand
and business system and franchisee which are people looking to run a copy of that business in their local
area.

It’s always set-up with these four common elements.

The brand which is going to be both owned and protected by the franchisor

The system that will be both proven and transferable

The support that you’re going to give at the start to get franchisees up and running and the support
you’re going to give them on an ongoing basis throughout the term of the franchise agreement which is
the last element that wraps the whole thing up that’s going to be both comprehensive and fair

First and foremost, starting with the brand and when we say it’s going to be owned and protected, you
need to have registered your trade and service mark. No one is going to pay money for something that
you don’t own and you need to be able to take legal action against people that set up and run the
business. So if someone sets-up and pretending to be you now, as an independent business you can
choose to do nothing at all but once you move yourself into the franchising arena where you’ve taken
money from someone to use your brand, you have to take action if somebody tries to rip that off. You
have an operating responsibility and obligation to protect that brand and to police it.

But it’s also about operational action against people with inside the network. The hardest part of
protecting a brand is where you need to take action against the franchisee that you’ve recruited. When
you take them on board, they’re going to be lively enthusiastic people and they’re going to have ideas
and new things that they want to bring in to your system.

So let me give you an example of that. Say you’re running a swimwear franchise and one of your
franchisees decides that they want to start selling spa equipment. That might work in an affluent area
but what you need to do is make sure as the franchisor that if one person is doing it in the network,
everybody does it. You need to know what your answers are going to be if a question that arises that’s
specific to your brand. You need to know what franchisees are doing and you need to monitor their
performance. You have an obligation to the franchisees as well as to your brand.
Systems need to be both proven and transferable. So there needs to be evidence that this business
works. As a future franchisor, you may one day go to a franchise exhibition and say “Hey, I’ve got a great
idea that I want to franchise” But franchising isn’t about an idea. It’s about a proven business system
that you own, that works and delivers a profit to franchisees.

You need to have piloted that model and be able to transfer your know how to franchisees in probably
somewhere between two to six weeks. That’s getting them up and running in the door and able to trade.
No one wants to pay a significant amount of money to buy into a franchise and go on a three-year
university course before they can get a return on their investement.

You need to have piloted a business. This could be a second outlet where you’ve set it up and run it an
arm’s length with a manager in the store. Or it could be taking on a franchisee on special terms. Giving
them a discount entry fee or a special exit plan if it doesn’t work out. But you need to recognize if you’re
doing that, that they’re sharing some of the development and some of the risk. But they all need to be
on the same terms on a franchise agreement.

You also need to develop and training course and an operations manual. The operations manual is going
to be the “bible” of how to do everything in the business. You know it inside-out but a franchisee is
going to need a detailed manual that sets out the sales, the marketing, finance, HR, and how to do the
day-to-day operational parts of that business. You also need to be able to train franchisees and training
someone is a skilled job. Just because you’re good at what you do, doesn’t mean you’re going to be
good at training someone to do what you do.