Franchising is a great way for businesses to help generate income streams far greater than can be envisaged through organic growth alone; although there are pitfalls that can collapse a franchise before it can begin.
That’s the view from Cardiff based franchising specialist, Alan Jones, who advises businesses on the pros and cons of franchising a business.
“There are many positive outcomes of franchising. ” says Mr Jones. “Franchising motivates the franchisee far beyond any typical employee incentive scheme due to the franchisee’s finances being dependent on the success of the business.’’
Mr Jones continued: ‘‘Start up business have a very high failure rate in the first five years. The inverse is true for franchised businesses, making it an attractive alternative. The franchisor doesn’t need to be in the business 100% of the time and the passive income stream franchising produces is a huge benefit to a business’s cash flow.”
The use of franchisees capital can accomplish company growth far more quickly than can be achieved if the capital had to be financed by the business itself.
The full franchising model is where the franchisee buys the business model in order to run the operation. There are other licensing models where the buyer purchases the right to sell or distribute products owned by the licensor.
Mr Jones was the former Group Financial Director for full-service agency Golley Slater, where he gained over twenty years experience in Finance, IT and Human Resources. He now helps business owners maximise their potential by building value in the business.
Mr Jones’ spoke of his key tips for businesses who are thinking about franchising: ‘‘Firstly, seek advice from someone that has a proven methodology of developing franchise systems. That is so important. How can you guide your business through a huge change in its model without having an experienced advisor at your side? Also, use the experience of your trusted advisor to develop a structured step by step approach that is clear, and have key indicators that let you know the progress of these stages.’
Mr Jones spoke on the most important asset in a business, people: ‘‘Having the right people within your business is key to success; and it is no different for franchisees. Have a robust recruitment model that defines, finds and evaluates the right franchisees that will benefit all parties.
“There are of course pitfalls surrounding franchising.” continues Mr Jones. “They are usually centred around not getting the franchise proposition right. At the Infinite Group we advocate a franchisee led proposition – it has to work for the franchisee and this will lead to a successful business for the franchisor.”
Mr Jones warns of other areas that can cause problems. Ongoing support is a vital aspect that is often overlooked and that territories must be carefully mapped out beforehand to avoid inequalities and disputes arising.