How to turn your business into a franchise

When wanting to move from running your own business towards running a successful franchise a number of things will need to happen. The first issue to consider is to ensure your business is attractive enough for others to want to buy into it. Apart from that you will need to ensure a market for the product exists outside of where you are currently trading supported by solid research figures and ideally evidence of what you are doing at the moment. Lastly and often the biggest challenge for the business owner is to capture the process of running the business effectively into an easy to understand manual which franchisees can follow once they have chose your specific franchise. Remember that that this will be run as a franchise and for that to work the franchisee will be looking to do everything the same as you do/did.

Market testing is an important part of this. If you cannot prove that there is a demand for the product or service your franchisees will be offering, they will be doomed to failure.

If you can demonstrate a clear demand for your product and service, you then need to prove that the franchise model works through the establishment of a pilot operation. The pilot operation will establish that all the back-up systems including training, operating manuals, financial support and marketing campaigns are effective. It will also give franchisees an indication of likely set-up costs, break-even points and how long it will take to become profitable.

The operations manual gives detailed information on how to set up and manage a new outlet. It highlights all the key activities, and explains how to do them the right way.

As well as preparing an operations manual, you also need to decide what support you will provide. This typically includes initial training for new franchisees, and continuing marketing and administration support.

Your brand is likely to be an important part of what you offer franchisees. Even if they know how to run a successful outlet, they stay with you because your brand helps them get customers. Protecting your brand is essential. For more information on brand management, see our guide on branding: the basics.

It is important that you put in place relevant protections to prevent your intellectual property (IP) being infringed (for example by registering your trade marks and company name or obtaining patents for your products). Once you have adequate protections in place you can then benefit from your IP through licensing. It is also easier to protect your IP if it is registered and you can prove ownership. See our guides on how to use trade marks in your business and protecting intellectual property.

Your operations manual and support services are an important part of this. They help to ensure that different franchisees do things the right way and provide consistent quality.

Is franchising right for your business?

Many businesses have used franchising successfully, including well-known names like McDonalds, Wimpy, Domino's, and others. However, franchising doesn't suit every business.

To start with, your business needs to be successful. Nobody will want to buy the right to franchise a business that doesn't make money. A franchised business needs to be profitable enough to make money for both the franchisee and you.

More broadly, your business needs to be one that can be replicated in different locations by your franchisees. Businesses that need high skills levels or professional qualifications can be more difficult to franchise but all the major optician chains have succeeded in doing so.

At the same time, you need to offer your franchisees something that makes it worth their while paying you, instead of simply setting up their business independently. For example, you might have a recognised brand name, provide equipment or supplies they need, or help with training and marketing support. For more information, see the page in this guide on how to develop your business format.

Having a well-organised and well-run franchise helps you recruit franchisees and is a strong incentive for franchisees to remain part of the franchise at the end of the initial franchise period.

You also need to think about the demands franchising places on you. You need to invest in developing and marketing the format. If you have limited financial resources, or are already working flat out running your business, you may not be able to do this.

Finally, you need to have the right skills and attitude to make franchising a success. You need to be able to sell your concept to potential franchisees, and to work with and control them. Rather than dealing directly with customers yourself, you profit by helping your franchisees to be successful.

The benefits of franchising your business

The benefits of franchising include using the franchisee's capital to develop a brand at a local rather than national level. The customer then receives a better and more localised service.

Growing your business can be difficult and expensive. The more you grow, the more capital you need, for example, to finance new outlets. At the same time, managing the business becomes more difficult, particularly if your business is spread across the country. You will need to be prepared to travel around the country when giving support.
Finance

Each 'franchisee' finances their own outlet. While the franchisee meets all the costs and collects the income, you receive franchise fees or a mark-up on products sold by your franchisee. For more information, see the page in this guide on franchise fees and royalties.
Management demands

The franchisees also run their businesses, reducing the management demands placed on you. The best franchisees will be highly motivated and have local expertise, making your life much easier.

Rather than managing their business, your role involves supporting your franchisees. This is likely to include:

    * helping the franchisee find and fit out premises
    * training
    * creating operating systems to help franchisees set up and run their franchise
    * providing marketing materials and resources such as a branded website
    * running advertising campaigns to build brand awareness
    * protecting and defending your intellectual property

In the early stages you are likely to spend a lot of time growing the franchise by recruiting other franchisees - perhaps through attending franchise exhibitions and running marketing and advertising campaigns.

As your business grows, there can be additional benefits. The more franchisees you have, the better known your brand becomes. Your purchasing power may also increase as you buy more, allowing you to negotiate discounts.
Potential drawbacks

Franchising can have its drawbacks. You need to invest in developing and marketing the franchise. You also need to make sure that you get the right franchisees and control what they do. A bad franchisee can damage your reputation and brand, hurting all your franchisees.

Despite this, franchising could still be the best way to grow your business. For more information, see the page in this guide: is franchising right for your business?

Low Cost Franchise Opportunities in South Africa

Cheap franchise opportunities are highly sought after due to their low investment costs. These opportunities are available across several different industries. In addition, some of these cheap franchises are for people who would like to operate one on a part-time basis. Vending services are popular franchise choices and are relatively cheap to join. There are several costs related to franchises that need to be evaluated and researched prior to joining one.

Franchises can be started for as low as R1,000 in liquid cash and can go up to over R100,000 in liquid cash. Some of cheaper franchises have similar attributes such as they can be operated from your home and they require no additional employees other than yourself. Operating a franchise from your home can save you a lot of money because you do not have to worry about leasing or building a separate office for your business. Some examples of these types of franchises include cleaning services, landscaping services, travel planning, vending services, tutoring services, and more. Some franchises, such as vending ones, may require you to negotiate or lease space at a retail store (i.e. supermarket, drug store) or shopping mall.

Many of the cheap franchise opportunities can be operated by you with no additional employees. This can be a major cost-savings because you do not have to pay salaries or benefits. For example, if you start a franchise of vending services that rent DVDs then you may be able to manage the machines yourself from your home. Vending services allow you to operate a franchise without actively having to be present to make money. You may only be responsible for setting up the machine, negotiating the space, and ensure that it is operating correctly. This kind of part-time franchise may leave you with time to pursue another business venture, hobby, or family time.

Vending service franchises have increased substantially over the past few years. Vending machines now sell items ranging from candy to energy pills to DVDs. You have many choices in deciding which industry you want to get involved with. Consider your market and the people who visit the retail space you are going to place the vending machine in to help you decide which product may sell the best.

There are many types of cheap franchise opportunities available. Most franchise programs will state how much liquid cash is required to join the franchise program. Vending services that sell candy or rent DVDs are very popular and inexpensive to join and operate. These types of services can be operated from your home and possibly on a part-time basis so that you can enjoy other ventures.

Article Source: http://EzineArticles.com/5865051

Explaining Franchising to SA Entrepreneurs

Franchising is a form of business or type of business formation found in South African and many other parts of the world. A franchised business normally is based on an already successful business plan which the owner of the business then intends to roll out with the help of digital marketing consulting firm in other parts of the country or the world. You as the person wanting to start a business will then pay the main franchise to open and run the business in the same way and under the same brand as the original franchise. Popular examples of franchises include McDonalds, Wimpy, KFC and others. The main benefit of opening a franchise is that there is less risk involved as the business model is already working, as well as the fact that customers will often already be familiar with the business.

Franchising is not an industry in itself. Rather, it's a way of doing business that can be applied in almost any sector. Today about 3,000 established franchise brands operate in nearly 250 different lines of business in South Africa.

Franchising has two main forms. In product/trade name franchising, a franchisor owns the right to a name or trademark and sells or licenses the right to use that name or trademark. Business format franchising, the type discussed here, involves a more complex relationship in which the franchisor provides franchisees with a full range of services and support, and franchisees sign an agreement to conduct operations in conformity with specific rules laid out by the franchisor.

According to the International Franchise Association, "Franchising is a method of distributing products or services. At least two levels of people are involved in a franchise system: 1) the franchisor, who lends his trademark or trade name and a business system; and 2) the franchisee, who pays a royalty and often an initial fee for the right to do business under the franchisor's name and system."

Franchising is a team effort. For any franchisor to succeed, the vast majority of its franchisees (all, ideally) must operate profitable individual franchise units over the long term. A brand's success depends on an ongoing partnership between franchisor and franchisee. One of the most common sayings in franchising is: "Franchising means working for yourself, but not by yourself."

For many, franchising's greatest appeal is the opportunity for an individual to control their destiny and secure their future. In its earlier days, franchising was a way for an independent-minded business person to "buy a job" - a sandwich shop or a home repair service, for example, and showing up every day as a hands-on operator.

In recent years, the franchise model has caught on as an attractive business opportunity for wealthier individuals and investors who buy many units at once; or who buy the rights to develop a geographical area or "territory" and develop a certain number of units within a specified timeframe. These multi-unit owners, area developers, or area representatives (some of whom also recruit new franchisees and support them within their territory) are part of a growing trend in franchising, and account for about 50 percent of all franchised units in South Africa today.

"Multi-brand" franchisees are also on the rise. These franchisees operate different brands under a single organization, creating efficiencies, economies of scale, and market penetration to increase sales and profitability. The primary reasons successful franchisees seek additional brands are 1) they have "built out" their territory for their current brand, and/or 2) they are seeking a new, complementary brand to smooth out the ups and downs of business or seasonal cycles. Franchisors, too, are combining several different brands under one roof, and frequently offer discounts to current franchisees who take on a second (or third) brand.

"Co-branding," in which a franchisee operates two brands from the same location, is another recent trend. Co-branding saves on real estate or leasing costs, allowing more profit per square foot and often balancing out day parts (breakfast, lunch, dinner). An increasing number of franchisors now offer several different brands, and often provide incentives to franchisees to co-brand.

Much of what prospective franchisees are seeking to buy in a franchise brand is peace of mind. They want to know, with as much certainty as possible, that if: 1) the franchise opportunity is presented accurately and realistically by the franchisor; 2) they take the time to perform "due diligence" by speaking with current franchisees, reading the Franchise Disclosure Document (FDD) carefully with the aid of an experienced franchise attorney; 3) after comparing the brand and sector under consideration with the competition (franchised or not); then 4) their chances of making money and building a successful business are better than if they started a business from scratch.

Yet for many aspiring entrepreneurs looking at the franchise business model for the first time - especially those coming from a corporate background - the business proposition can seem ludicrous: "Why should I pay tens of thousands of rands before I even start, and then 8 or 10 percent off the top every month for 10 or 15 years?"

For those who investigate further, the answer is clear: they can make more money faster through franchising than on their own; and they realize the potential for a greater long-term return on their investment as well -- despite paying an up-front franchise fee and a percentage each month of gross sales for "royalties" and a company-wide advertising/marketing fund. Franchise fees range from a few thousand dollars to tens of thousands, depending on the concept, while royalties generally run 5 to 8 percent and the marketing/advertising fund an additional 1 to 3 percent.

Legally, franchisees do not "own" the franchise they "buy." They are granted, or awarded, a license that gives them the right to operate and manage their franchise business. However, franchisees do own the assets of their company, and as long as they adhere to the franchise agreement have specific rights under state and federal law. Franchisees can form franchisee associations that can participate in corporate decision-making if the franchisor is amenable, or band together to oppose decisions they see as detrimental to their operation and the brand in general.

Choosing the right Franchise

Choosing the right franchise opportunity for your business can be a challenging task. Obviously you want to best value for your money and want to at least be ensured of a good income opportunity to ensure a good return on your investment. Added to this it will of course be important to have a good background in the industry in which the business operates as well as a sollid business plan. Although the franchiser will be providing both training, development and support to ensure your business is a success, entering into a industry that you know little of  will quickly result in more difficulties that you are prepared to deal with.


Potential business owners, or franchise owners should I say in this case often make the mistake of first looking at which opportunities are available and which of these seem most attractive. This mayu not be the best way to go about it.

When you start this way, you can end up paying good money to do the same job you did as an employee; a job that you probably didn’t like in the first place! We do this because it is what we know and it seems logical. However, if you are ready to purchase your own franchise business and want to guarantee you make a great decision, let me give you some ideas to make choosing the right franchise more fun and profitable.

When you buy a franchise, it needs to be an extension of you. You need to ensure that the franchise you buy satisfies the following two criteria: 1. You are doing what you enjoy. 2. You are doing what you are good at. In order for the franchise opportunity to be an extension of who you are, it needs to satisfy these two criteria.

Before you start looking or if you are looking now, go through the two exercises below.

Once you are confident about what you like doing and what your strengths and weaknesses are, try to match your likes with your strengths
1. Answer the question ‘What do I like doing?’

Start a brain dump and write down anything you can think of. Write down everything that interests you and everything you enjoy doing, no matter how silly it seems. You can refine your list to be more business focused later on. Once you determine you have captured what you like doing, move onto the next exercise.
2. Answer this question ‘What are my strengths?’

A good starting point is to ask your friends or colleagues. You’ll get some great answers. Be prepared, however, because they might also tell you what your weaknesses are. This can be powerful yet confronting. This exercise ensures that you do not search for a wrong opportunity.

Once you are confident about what you like doing and what your strengths and weaknesses are, try to match your likes with your strengths. This requires thinking about what strengths you could use with what you like doing. For example, if you like sales and you know you are good at it, this is a great match. However, if you like landscaping but your strengths do not include a talent with outdoor architecture, you may want to rethink your decision.

Be aware there is another side. We all have weaknesses and fears, and your business will also carry these. Do not despair! The reality is a business opportunity will never be a perfect fit. The key is to plan for your weaknesses. None of us are good at everything. Inevitably you will find that you fill in the ‘gaps’ through a number of sources. One of those should be your franchisor.

Many good franchisors provide excellent systems that allow you not to worry about IT, reporting, accounting or workflow. Many of the administrative and operational activities are handled by your franchisor as part of the royalty/management fees.

Over the years, we have found that by developing great systems and providing all the back office operations we allow our franchisees to focus on what they are good at, which is growing their business.

As your business is an extension of you, make sure that the opportunity you choose is a match between your strengths and what you enjoy doing. Utilise your strengths and compensate for your weaknesses.

Once you feel confident about what you are looking for, go find a few businesses that meet your needs, support you financially and, more importantly, make you happy doing what you want to do.

Ensuring an successful franchise. What is the secret?

There are many considerations in choosing and running a successful franchise. Business skills and knowledge, the right area, knowing your product and market, a well thought out business plan, solid support from your franchiser and commitment from you and your team are all key ingredients in ensuring that your franchise operates effectively.

Choosing the right franchisor
Part of it comes down to choosing an established company with a proven track record and a good reputation. It is also important that it belongs to the British Franchise Association and run its business in accordance with the best practices laid down in the BFA “Ethics to Franchising” guide. However, once you have chosen the right company what do you need to do on a day to day basis to achieve success?

Maintain a good working relationship with your franchisor
Communication should work both ways, to and from your franchisor. Communication should be regular and any advice given acted upon. Whatever issue you may be encountering, you can guarantee, someone somewhere has already faced a similar situation and your franchisor will be able to assist you. Use your franchisor’s experience rather than learn the hard way! That is why you have joined a franchise and not gone out on your own.

Monitor cash flow
Keep referring back to your business plan and review the situation in relation to your forecasts and projections. Believe the figures (they don’t lie) and use them to make informed decisions about your business. It is important not to underestimate the working capital that is required to run the business day-to-day while it is growing. Problems with cashflow can be mistaken for poor profitability especially in the early days, but careful planning and monitoring will prevent unpleasant surprises.

Market your business
There are a lot of myths about marketing. The plain fact is there is no-one better to market your business than yourself. Use the passion you have for your product or service to talk to people face-to-face. Enthusiasm is contagious and you will be more successful. However, remember to monitor the results of any marketing activity. You do not want to waste your money in the future if a campaign has not returned your investment.

Good time management is critical
Time is now hard currency and you need to spend it wisely. Discipline, planning and flexibility are the keys to success when it comes to time management. It is too easy to become distracted when you are working for yourself with no one to report to. Time spent planning and preparing saves time in the long run and will increase your efficiency. Be flexible and regularly challenge every task associated with running your business.

Keep up to date with paperwork
Little and often is the key. Do not attempt to do all your paperwork for the month in one day. Not only does this become a terrible chore but by the end of the day you are more likely to be tired and make mistakes. In addition, where possible invest in IT and increase your computer skills so that you can make full use of the accounts systems available. Of course, don’t forget to back up your system on a regular basis.

Recognise your strengths and weaknesses
It is important you recognise your own strengths and weaknesses. Use them to your advantage. If you are dreadful at managing one aspect of your business employ someone to manage it for you. Your time will be better and more productively spent on working with the elements of running your franchise that you are good at and enjoy.

Reward Yourself
The responsibility of running the business is down to you and that includes the responsibility for rewarding yourself when things go well. Set yourself a goal and when you achieve it be sure to congratulate yourself. You would do it for an employee so why not do it for yourself?

Enjoy Yourself
The chances are you made the decision to take on a franchise because you wanted to enjoy what you are doing more than you were previously. Yes, it does require hard work, commitment, determination and tenacity but don’t lose sight of the reason you started. Enjoy your business, go out, enjoy overcoming the challenges and above all don’t lose your sense of humour. Enjoy!