At the heart of any sound franchise operation is the transfer of knowledge and experience. Franchisors train ambitious, self-motivated people who have the drive and determination to succeed in running their own business to operate a replica of the successful business they have created, using precisely the same brand, systems, marketing and techniques that have contributed to that success.
The mantra of franchising could be described as ‘Do as I have done, in the way that I do it and you should achieve similar rewards’. Of course, rarely, if at all, will a franchisor offer a guarantee of the available rewards because each of the appointed franchisees will actually have different capabilities, attributes and ambition. But, a robust, proven franchise should offer its franchisees an equal opportunity to replicate a track record of success.
Critical therefore is that success can be demonstrated – a prospective franchise must only be built on the foundations of a good track record. A franchisor must be able to show that
- there is a sustainable market for the product or service.
- there is a USP that can be effectively exploited to gain market share
- the intellectual property of the business is properly protected.
- franchisees will operate in the same marketplace in which the businesses success has been developed, without restriction.
- the supply chain for core product or services is stable and secure
- there are no critical factors to success that a franchisee could not also achieve or gain access to e.g accreditations, qualifications
- the skills or attributes to operate the business are fully understood, and would be available from prospective franchisees
- it is a profitable business – a franchisee can make money and achieve a good return on investment.
Operating a pilot operation to demonstrate the performance and viability of the proposed franchise model is therefore a critical part of the process of developing a successful franchise. Which, from a prospective franchisees viewpoint makes obvious sense; why invest my hard-earned cash in a business unless it can convince me I could run it, that there is customer demand and that it offers the chance to provide the earnings and lifestyle I seek?
Franchise consultants are still approached by people with a ‘great idea’ that they want to franchise. However good that idea may be the consultants’ response should always be the same – run the business yourself for a set period, gather the evidence base and then assess its feasibility as a franchise. Only then could you potentially have something which others may be persuaded to invest in.
For established businesses that shouldn’t be a problem, should it? Well it can be. As an example, one of my clients is a successful repair and maintenance service that has been operating for over 20 years, using great technology and with a tremendous market reputation. The owner saw franchising as an excellent strategy for expansion and improving geographic coverage, which on the face of it was right. But, having designed the franchise model the first 18 months were actually spent piloting.
The reason was that the primary source of my clients business is the construction industry. Which presented a problem; due to health & safety restrictions and the requirement for professional accreditations franchisees were unlikely to be qualified to supply their local construction market. Which effectively meant that the existing business model could not really be fully replicated. Nevertheless, it was clear there were many other property related markets with demand for the service, but the company had no track record to demonstrate how quickly these markets could be developed or how viable they might be. So, the piloting focused on the marketing methodologies to tackle these other markets. This done, the business is now building its network of franchisees.
Which proves the point that even well established businesses may need to do some piloting or concept testing before embarking on a franchise development strategy.
A franchise network must be built on a base of verifiable information. Good franchising demands open and honest sharing of data to show how the business works and the potential it offers. This will only be possible if the business has been run for sufficient time in exactly the same format as the franchise model to produce a reliable base of knowledge. It is this knowledge that is the primary currency of a good franchise.