Previously I wrote about what to look for when shopping for a franchise business to invest in, now I will dwell on a topic that is quite a fad in Malaysia now, Creating Our Own Franchise. My recent trip to Kuala Lumpur and encounter with 2 F&B outlets in Kuchai Lama in Kuala Lumpur that wants to franchise their business made me came up with a series of article related to franchising.
Franchising is an avenue to successfully expand ones business at the shortest time possible with the least capital investment and risk burden for the franchisor. But it should not be considered an easy way to fortune and also a tool to boost or assist ones ailing business. A successful franchise will allow both the franchisor and franchisee to reap the benefits.
Many of the world’s largest corporations have used franchising to speed up their growth as a global brand. As with any business venture, the business needs to be well managed, must be profitable and have a reputable and creditable track record. Thus, before one begins to offer ones business to potential franchising market, they have to ask themselves these simple questions:
- Does the business have enough reputable history and track record to attract potential franchisee and investment at a premium price?
- Are the products or services easily replicable by the franchisee to offer to their potential market?
- Are there Standard Operating Procedures in place and practiced to manage the business to ensure uniformity and consistency?
- Can this concept, SOPs, terms and conditions be easily accepted and transferable to the franchisee to learn to operate the business in 3 months or less?
- Does the business have a structure that is able to oversee a franchise base business venture and support franchisees in many different locations?
- Does the franchise have a sound marketing plan to branding campaign that will also benefit the potential franchisees?
- Are the concept sufficiently unique and the target market properly differentiated to provide a substantial amount of security and competitive advantage that will transpire to an adequate return on investment, which is around 8% to 20% after royalties?
THE PROCESS OF FRANCHISING
Ø Maintain a lucrative and successful business model.
Ø Develop a sound plan for expansion, which must take into consideration the numerous issues like momentum of growth, territorial distribution, support, human resource, and fee structure, etc.
Ø Then the franchisor needs to draft a proper legal documentation or franchise contract.
Ø Followed by the development of an operations manual or SOPs.
Ø And finally, the franchisor will need to create marketing and promotion materials to sell the franchise to potential franchisees.
The key to success in franchising is not only limited to creating a lucrative business model which is easily replicable and mange, it also lies in the ability to sell the franchise and to ensure franchisees also succeed in their franchise venture. Passion, time and effort are pump into the franchise by both the franchisor and franchisees, the franchise may become the next Old Town or Manhattan Fish Market.