Starting a franchise business with a successful franchise formula, where to start?

You did it. You developed a unique concept into a successful business. The success is addictive. You want more. You want to make the step from entrepreneur to franchisor. How much do you want it?

The potential and scalability of a franchise formula, that’s what makes it so attractive. A good example is SushiPoint, started in 2010 with one branch by Hajo Bertrand. The successful franchise formula now has more than thirty branches and receives consistently high ratings of 4.5 stars or higher. You are also undoubtedly familiar with the internationally examples such as the franchise formulas of McDonald’s and Domino’s. Unfortunately, the reality turns out to be less rosy. Many franchise formulas do not achieve the intended success because it often turns out in hindsight that the business plan was not solid enough.

In this blog we first answer the question: What is a franchise? Next, we offer you a step-by-step plan that can help you during the exciting journey from a successful business to managing various franchise companies.

 

What is a franchise? (hard versus soft)

A franchise is a close cooperation between a single franchisor and several franchisees. The franchisee is given the opportunity (for a fee) to build on a previously successful formula. With a cooperation such as this, both parties benefit from the advantages of a franchise. As the franchisor, you manage the branches and provide support in the area of marketing and sales, while the franchisee focuses on his own branch and his personnel policy. The aim is an efficient division of tasks and a uniform image to the outside world. However, the degree of uniformity strongly depends on the shape of the franchise.

A more detailed explanation of the different franchise forms of delivery restaurants can be found here. Below is a brief but clear comparison between hard and soft franchising (although a franchise can also be placed in between these two extremes):

Soft franchise

  • Advantages: A high degree of entrepreneurial freedom and you save valuable time in drawing up your franchise agreement and franchise manual.
  • Disadvantages: Little control and a lower degree of uniformity between the franchise companies.
  • Example(s): Big Snack provides a formula for cafeteria’s within communities

Hard franchise

  • Advantages: You retain control and uniformity between the various locations.
  • Disadvantages: It takes a lot of time to work everything out to perfection and the franchisees are limited in their entrepreneurial freedom.
  • Example(s): McDonald’s, Starbucks, Domino’s etc.

 

Step-by-step plan: Become a franchisor

1. Test and optimize your franchise concept

You came up with a unique concept, opened a branch and are currently enjoying its success. It is a misconception to then assume that other branches will also be successful under the same franchise formula. All kinds of (regional) factors can cause a non-comparable situation. For example, you have to take into account different consumer needs and differences in competition.

In order to ensure that your franchise concept also works within the area that you would like to open your second franchise in, it is advisable to conduct a market- and industry study. A market- and sector study consists of:

  • A market survey through surveys and/or interviews. Is there a need for your product and/or service within this area?
  • A SWOT analysis: Strengths, Weaknesses, Opportunities & Threats.
  • An investigation into the number of start-ups and bankruptcies in the intended location.
  • A marketing analysis. Determine your marketing strategy on the basis of the results: which target group is most effective to approach in the future, and how?

 

2. Recruit your first franchisees

Has your concept passed all the tests and has the shape of the franchise formula been decided (hard versus soft)? Then it’s time to recruit your first franchisee(s). Especially these first franchisees have a lot of influence on the further course of your franchise formula. They determine the basis on which you can grow. In addition, they proclaim your message and represent what you stand for.

It is important to draw up criteria that your future franchisees must meet before you start the application procedure. You can base these criteria on your established goals, mission and vision. We also challenge you to discuss this with franchisors and franchisees within your network. Take your time to recruit your first franchisees and don’t suddenly drop pre-set criteria!

 

3. Share your knowledge with your franchisees

As soon as you have found a suitable franchisee, it is very important that you are able to transfer your acquired knowledge efficiently. First of all, it is wise to work out the concept of your franchise formula, including all the knowledge about it, in a document. This will be included in the franchise manual, which also contains all the basic agreements. In addition to this manual, a franchise agreement must be drawn up and it is good to set long-term goals so that everyone has a similar vision towards the future.

Finally, a training programme can prevent future problems. In many franchise formulas, a new franchisee first spends a week at one of the other franchise companies. If your franchisees are properly trained, you as a franchisor will spend less time on solving problems during later stages. However, you will need to update documents such as a franchise manual, a franchise agreement and a training programme on a regular basis.

 

4. Prevent and manage conflicts with franchisees

Within many franchise formulas, conflicts sooner or later arise between the franchisor and its franchisees. The cause? A lack of clarity and wrong expectations on both sides. Therefore, discuss in detail what you expect from the franchisees and what they can expect from you as a franchisor. In particular, the expectations of franchisees regarding their entrepreneurial freedom will have to be tempered in the case of a hard franchise. The rights and obligations of the franchisor and franchisee will be included in the franchise agreement.

The franchisees will also want to express their ideas, opinions, questions and/or complaints on a regular basis. It is important that you are aware of such expressions so that you can gather good ideas and initiatives, solve any problems in time and so that franchisees do not stir things up. The role you will have to take on is different than you may be used to as an entrepreneur. You will have to act more often as a mediator between different parties and delegate responsibilities.

 

5. Manage and use all incoming data from your franchise chain.

As your franchise formula grows and you open more franchisees, you will find that you have less and less time to visit the franchisees in person. Eventually, you will even have to hire people called franchise managers to do this for you. In this new role in which you gradually have to distance yourself more and more, data is your best friend. The challenge for you is to set up all the data from the start to keep it organized. If you do this from the start, you don’t have to clean up a big pile of data later and you have everything at your disposal as soon as necessary.

Assuming that we at CashDesk have more IT knowledge than the average franchise formula, it might be interesting for you to outsource the processing and organization of data to an independent party such as CashDesk. If you are interested in our delivery software, specifically tailored to franchise formulas, please contact us or request a free demonstration. You have come to the right place for software and/or advice on franchising or other meal delivery solutions!

 

Thank you for reading,

CashDesk