Franchising is a business expansion strategy where the franchisor grants an individual or company (franchisee) the rights to use its brand name, products and/or business system for an initial fee and royalty.
The journey to a successful business venture such as franchising begins with identifying all possible challenges, creating solutions, and developing contingency plans. Decision making will be based on the results of an evaluation of the proposed market that encompasses industry growth rate and projections, profitability, consumer spending patterns, and consumer brand perception.
Decision 1: Type of Franchise
Varying degrees of involvement exist in franchise agreements, the least being product and trade name franchise. This grants the franchisee the authorisation to use the franchisor’s trademark and brand name with a primary focus on the sale and distribution of a specific product.
The business format franchise is a progression wherein the franchisee is permitted to use the franchisors business systems in addition to its trademark and brand name.
The decision on the type of franchise agreement to employ is dependent on the results of a preliminary market survey and feasibility report which when analysed provides indications of the best fit agreement for the identified market.
Decision 2: Standardise or Adapt
The decision to standardise or adapt products and services will depend on the type of franchise agreement and relationship between franchisee and franchisor. Standardisation assumes a one size fits all approach and replicates this approach in multiple franchises. Adaptation has various expressions; it could be tangible like modifying the size or quantity offered or intangible like adjusting the positioning of the brand to suit consumers expectations. The pricing system and choice of marketing communication tools could also be adapted to suit the prospective market.
The key consideration in deciding on standardisation or adaptation is be aware that there is more than one appropriate approach and a hybrid solution that best caters to the sustainability of the product or service, market and franchisee is preferred.
Decision 3: Training and Support
The level of training and support provided by the franchisor is significantly influenced by the type of franchise agreement. Training is typically provided when the franchising agreement is business format as this requires learning and integration of company practice and procedure.
This stage gives the franchisee the leverage to fully utilise the resources available.
It is important to consider the various factors that could influence the type of decisions made by a prospective franchisee. There is no universally acceptable set of decisions that guarantee a successful franchise agreement, rather there are decisions that could improve chances of success and arriving at these decisions is the role of a business advisor.
By Imaobong Amaechi
