Franchising is a form of business by which the owner (franchisor) of a product obtains
distribution through affiliated dealers (franchisees). Franchising began back in the 1850’s when Isaac Singer invented the sewing machine. He created the very first franchise business plan. In order to distribute his machines outside of his geographical area, and also provide training to customers, Singer began selling licenses to entrepreneurs in different parts of the country.
During the last Super Bowl 75% of the advertiser were franchisors, a huge percentage of those advertisers were also manufactures that use franchising to sell their goods and services (Audi, Hyundai, Toyota, Volkswagen, Jeep, Lincoln, Dodge, Mercedes Benz, Tide/Tide Dry Cleaners, Pepsi/Taco Bell, and Coca Cola).
There are many reasons for a manufacturer to start retailing, and there are many reasons to expand the retail network through franchising. Marketing through franchising is not just for the “Super Bowl Elite” and can be started for a minimal investment. In order to be successful at any level you need a solid franchise business plan.
Starting Up The Franchise Concept
Establishing a successful franchise requires considerable thought and planning. A good way to start is to identify the elements of the business that will be transported to each franchised outlet. Companies need to have a good track record of operations within particular a market to show that they can support effective business systems. The franchise business model is an easy-to-implement business plan which includes manufacturing processes and distribution systems.
Companies wishing to franchise provide a protective framework for their franchisees by monitoring the quality and standards of the network as a whole.
These support services (the cost of which should be included in a franchise consulting fee) includes:
- Product and service development
- Store layout and design
- Store systems
- Operation manuals and best practices
- Promotion and public relations for the network
- Financial and administration services for the network
- Communication between franchised outlets
- Discipline and quality control
- Protection of intellectual property (such as brand names, patents, copyrights and trademarks).
It is essential to fully test prototypes of the business. Prototyping tests and refines the business concept, products, and operating systems that a company will be licensing to franchisees. Prototyping should be tested in different types of markets and locations – and for a sufficient time period.
The operation of the prototype affords the franchisor the opportunity to test and refine:
- Designs, layouts, decor and signage
- Customer reactions and satisfaction
- Equipment and fixtures
- Training methods
- Advertising and marketing
- Job descriptions
- Number of employees needed at different times
- Required skill levels
- Wage levels and benefits
Testing the prototype of the business concept and operating systems prepares companies for effective franchising. It is essential to have the basics of the operating systems and standards developed and understood before franchise expansion is launched. Before implementing a franchising program, the company needs to evaluate what the pilot operations have shown about the business. Once convinced of the viability of franchising model, a manufacturer can continue to finalize its franchise business plan and expand the franchise concept.
We are often asked by companies to test the viability of their businesses for franchising. We have helped hundreds of entrepreneurs take the next step to expand their businesses through franchising. Franchising is not the best answer for every business, however. You should work with reputable franchise consultants with a strong track record in helping companies before making your first investment in franchising. To find out if your business is franchisable, take our quick franchise quiz.