This article is based on an interview conducted on Besigheid wat saak maak (Via, DSTV Channel 147)
How franchising works
A franchise is a system whereby a successful business owner gives third parties or franchisees the right to use the business’s trademark and know-how for their own profit. The franchisee signs a franchise agreement and pays license or franchise fees in return for these rights.
Can any business be franchised?
Franchising spans many industries from the cradle to the grave, from the retailing of baby products to the provision of funeral services and many other categories. However, to franchise successfully, a business needs to answer the following questions positively:
- Does the business have a high degree of standardisation?
Everything from the product offering, transactional and accounting systems should be standardised to achieve successful franchising. Businesses with a high degree of standardisation tend to franchise successfully. This is because franchisees find it easier to follow systems and set procedures while franchisors can better monitor quality and performance in a highly systemised franchise.
- Is the business operating in a growing industry or market?
For franchising to flourish, the business must be an industry or market that shows consistent and continuous growth.
- Is it possible to transfer the necessary skills to operate the business to a franchisee?
The business concept and operating system should be packaged into training that can empower someone without industry expertise to run the business.
- Does the business have a strong brand and solid marketing methods?
Strong brands have the potential to be strong franchises. A strong brand gives a franchisee instant market recognition and support. The business must also have solid marketing plans in place to support continued brand growth.
- Will both the franchisee and franchisor derive financial reward and sustainability from operating the business as a franchise?
Franchising works when both the franchisor and franchisee make a return on their investment. The franchisor must carefully investigate the business case for each franchise opening to ensure market potential and subsequent profit potential. Franchise fees must be affordable and market-related.
If you are considering the franchising of your business, it’s crucial to interrogate these and other aspects that can make or break the success of a franchise. The best way to ensure that you cover all the bases is to get professional assistance from a franchise development consultant. For more information, contact us