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Franchising considerations

Posted by Carolyn Dufton on 20 October 2008
Franchising considerations

Many people have aspirations of franchising their business but have absolutely no idea at all of the reality of doing so.
Some people have franchised their business but are not calling it a franchise when legally they should. They think they can choose how to categorise their business, whereas the reality is that franchising is a highly regulated industry. If a business falls within the technical definition of a franchised business, one cannot choose to call it anything else and therefore all franchising procedures should be implemented.

Others sensibly admit that they know nothing about franchising but would like to know more.

Franchising can indeed be a minefield. The worst "minefield experiences" are with businesses that have attempted to franchise themselves with no professional advice or input from the experts.

They have opened themselves up to potential litigation by breaching the Trade Practices Act every which way. Disgruntled franchisees will have no problems "bringing the Franchisor down" as a result of sloppy legal and operational documentation or lack of it. The sad part is that the rectification of such cases often costs the Franchisor much more in the end than if the business had sought professional advice from the very start.

Potential Franchisors tend to be very entrepreneurial. They have big plans for their businesses.
This is great, when the Franchisor has;

  • Created a proven profitable business system
  • done their homework
  • researched franchising as a business system.
  • Is prepared to invest in franchising advice to create a professional system.

BUT unfortunately and all too commonly it is sometimes just a case of ;

  • A business trying to sell a "good idea" rather than a proven business operation.
  • A business gambling on the success and selection of their franchisees on a hunch.
  • Territories being chosen with the flick of a pen and no research data.
  • The franchising documentation is created with the help of the local conveyancing lawyer.(at best)
  • An attitude of "Everything will work out fine."
  • " I can do it myself. I don't need help. Think of the money I will save."

There certainly are fantastic opportunities available for a good Franchisor who is keen to achieve a  "win win" situation with potential franchisees.

It is crucial however that any potential Franchisors should consult with experts on how to structure the new franchised organisation in order not only to comply with legislation but just as importantly,   to create a harmonious and potentially very profitable enterprise.

It is advisable, that before a business launches into the franchising process; they should produce a thorough business plan to self assess their viability to franchise.

There are products available to help Potential Franchisors self assess the suitability of their business and themselves to franchising. Franchising is not just about the business, it's also about the Franchisor's ability to create and maintain relationships.

If the business owner then/still feels that they have a potentially "franchiseable " business, they can then proceed to the next stage, which is for a franchising consultant to research and explore with full consultation with the client, the feasibility and viability of franchising the business.

Franchising is a very specialised area and it is not for the half hearted. Any business vaguely considering franchising should research everything that can be found about the topic.

Most importantly, businesses must do their sums. They must know how much the process is going to cost.

Time and money spent on franchising a business professionally and with lengthy consultation and consideration is truly an investment. If done professionally, the returns both financially and personally, should far exceed the expenditure.

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Author: Carolyn Dufton
About: Carolyn Dufton Dip. Bus (Franchising) heads the team as the owner and manager of franchisingplus. Carolyn has a wealth of small business experience, and many years of hands on franchising experience.
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Tags: Franchising

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