Franchising Our Business

[fingerprints]

We are currently in the process of franchising our business in the UK. Despite the "Credit Crunch", our Q1 sales for 2009 show a HUGE increase on 2008, and franchising (for us, at least) is a very good way to expand the business to meet the increasing demand for our products.

Franchising itself seems to be increasing in popularity, as people look to secure their own future by taking more control of their family finances.

We are aiming our franchise opportunities squarely at the "Mumpreneur" market, due to the nature of the products and the likely end-customer, but they would equally suit anyone with the right mix of skills.

I wondered what other people's experiences were regarding franchising, and was interested to hear real-life situations. Any tips for companies to deal with / companies to avoid? What advertising methods work best to attract "pilot" franchisees? Is bfa membership an absolute must? What finance is available to potential franchisees? etc etc.

[FranchiseShop]

Hi Tim

A lot of questions there

Firstly, congrats on making a success of your business, in these times it is always great to hear.

Franchising is indeed increasing in popularity in both businesses going to franchise and with people looking to purchase a "business in a box" I know this from the increased enquiries we gain via my site from all sides. January of 2009 saw us gain around a 30% increase in enquiries which says to me that people are worried about their jobs and are looking for other means of employment and security.

OK - Your questions.

BFA membership:

No it is not a must at all and i would not recommend signing up with them until you have your pilot franchises off the ground and are sure this is the direction which is going to work for you. No point chucking several thousand pounds their way for a shiny badge when you could be putting that cash into marketing.

Tips for companies to deal with:

Hell yeah!

1. Coconut Creatives for all your PR work
2. ARC media for your online advertising management (although Coconut Creatives can do this too)
3. Franchise Recruitment Services for lead management and consultancy (FRSLTD)
4. The Franchise and Licensing Consultancy for lead management and consultancy (TFALC)

I would recommend using a franchise consultant to help you with setting everything up to franchise, there are many very experienced people in the industry whom I can recommend and one in particular offers a free phone consultation from anyone referred through us so it may well be worth your while having a chat with them to see what they can do for you.

Pilot Franchises

Quite simply - virtually give them away, cover costs if needed but the fact is you want to get them running quickly and have them running for at least 1 year (preferably 2-3) so that the end result is you have a few franchisees running in profit, you can also use this time to iron out any glitches and get everything running smoothly.

Once you are ready I would be happy to run a free e-shot to our subscribers to see if anyone would like to take you up on your pilot franchise offer. The last e-shot we did gained a client a pilot franchisee so they are worthwhile.

There are several franchise directories out there which would give you a stream of leads, mine of course but also franchisesales.com and franchisedirect.com (as well as dozens of others!) they will help you create a listing on their site and you should have no problems getting your first few pilots taken up between the leads you will receive.

What finance is available to potential franchisees?

Quite simply, not much! You are best to point them in the way of Natwest or LLoyds TSB as these are the two largest franchise lenders. Local initiatives may provide some funding however.

My advice on starting out with new pilots is simple. Take it steady, find the right people and do not just take on anyone interested and really work with them to make the new businesses a success. At the end of the day this does your reputation the world of good and puts you in a strong position for selling your franchise at full price. I have seen a dozen or so franchises in the last year that have not done this and failed to prove their business model worked, which failed for their company and left a lot of franchisees heavily out of pocket when all collapsed.

Feel free to give me an email on matthew @ the-franchise-shop.com

[fingerprints]

Matthew,

Many thanks for taking the time and trouble to respond...

The "bfa" question is one that is troubling me, as I have heard both positive and negative thoughts. Long term, I don't see why it wouldn't be beneficial - but you are quite right, the membership fee for provisional membership represents a very large cost to a small company who is financing the move into franchising purely out of its existing profitability!

I'm still a little sceptical of "Franchise Consultants" - as whilst I'm sure there are many excellent ones, I'm just as certain that there are a good few charlatans out there as well, who wouldn't be able to tell us anything that we didn't already know... and unfortunately, as with many other things, it is hard to choose one from another.

We have already done a lot of the groundwork ourselves, with some assistance from outside companies where necessary, but it may be interesting to speak to a Franchise Consultant for a quick 30 minute chat to see what they could offer in addition...

We are actively looking for pilot franchisees RIGHT NOW, but reaching our target audience is perhaps one of the more difficult things to do. My head says "Don't advertise in Franchise publications, or with specialist advertisers until the Pilots are complete..." but that gives rather a Catch-22 situation!

We have priced our Pilot franchise 'competitively'... I take your point on "giving them away", but that does also have its downsides. A franchisee who is prepared to make a reasonable financial commitment using their own money, has much more of a stake in the business they are running, and a greater incentive to make sure that it works to the best of their ability. Someone who has no financial commitment, who can just bail out (at no cost to themselves) if it isn't going quite as they wanted, would make a really BAD pilot franchisee - so it is a very delicate balancing act.

If any of the companies you recommend are experienced and knowledgable in dealing with "pilots", then please let me know!

I'm just checking out the other companies you suggested, too - but thanks once again for the very in-depth response, it is much appreciated.

[Lasting Designs]

For an independent view, ie as somebody in your shoes as the founding business and not somebody with a potential interest, Lisa for Talking Tots maybe able to help, she's a member here. All I know is that she has successful growing franchise and thus must be doing something very right, plus she's a really nice person as is her business partner Tracey.

[Emma]

Thanks for helping out, Matthew.

[LisaTalkingTots]

Originally Posted by Lasting Designs

For an independent view, ie as somebody in your shoes as the founding business and not somebody with a potential interest, Lisa for Talking Tots maybe able to help, she's a member here. All I know is that she has successful growing franchise and thus must be doing something very right, plus she's a really nice person as is her business partner Tracey.

Thanks Alan ... that's very kind. Emma - more than happy to chat any time.
Regards,
Lisa

[findnetworkingevents]

Hi,

As someone who has seriously looked into franchising in the past (as a franchisee rather than franchising my own business) I have a few thoughts.

I personally regarded membership of the BFA as a good thing, it gave me confidence that the the franchisor (hopefully) met certain minimum standards. I suspect as more and more people are franchising their business this will become more important.

I think you need to be very careful about the quality of the people you take on as franchisees. Some people think that by buying into a franchise the money will automatically come flooding in. Although you may have a proven business model, I believe you still need entrepreneurial qualities to succeed. I spoke to some failing franchisees during my research (the ones the franchiser didn't want me to contact!) and they came across as very negative about the whole thing and felt they had been mislead. This kind of thing can damage your image. Make sure people know what effort is going to be involved and they are 100% committed. I agree with the comment about setting the franchise fee at a higher level to ensure committment.

Regards

Stuart