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Figuring Out


Is Franchising suitable for your Business

What is Franchising

A business ‘partnership’ in which one party permits the other ‘partners’ to replicate a proven business system, operating under a common brand, in return for initial and ongoing fees. It allows a third party to legally copy your business in exchange for an upfront payment and ongoing management services fees.

To franchise a business you need the following factors:- 

  • Sufficient development capital to establish a franchise system
  • High enough margins to share
  • Existing business network or ‘pilots’
  • Easily transferable knowledge
  • Identifiable brand or trademark
  • Expansion requires investment into property, equipment and staff

The Benefits

  • Franchise fees will generate a stream of capital income and ongoing revenue
  • A loss of profit margin will be offset by much larger overall revenues
  • Motivated franchisees ‘running their own businesses’ will generate higher per unit income than employees

What can be franchised?

  • Very diverse range of businesses
  • Proven business systems capable of replication
  • Profitable businesses financially viable for both parties and financially secure
  • Steady or growing demand for your products or services
  • Simple business formats that are easy to learn
  • Identifiable brands and trademarks with your own distinctive image or concept

Undertake a SWOT Analysis of your brand

Trading History

  • How long have you been in business?
  • What is proven?

Profit Margins

  • Are these above average industry benchmark?
  • Is there enough margin for two?


  • How big is your market?
  • How volatile is your market?
  • Does it have mass appeal?


  • Is there consumer acceptance of your product?
  • Is your product or service easy to sell and deliver?
  • Quality record?


  • Is your Intellectual Property protected?
  • Is there a unique and distinguishable marketing approach?
  • What is your reputation in the market place

Business Management

  • Do you have the management skills and capacity to create a new culture?
  • Is your business professional and well presented?
  • Is your management financially skilled?
  • Do you have well documented processes and systems in use?
  • How is Information Technology used in your business?
  • What is your attitude to risk?
  • Is there a commitment to research and development?

Franchise Opportunity

  • Do you have sufficient access to development capital to fund growth?
  • Are there similar franchises already on the market?
  • Will the franchisee be able to control their costs?
  • What will be the minimum term?

Reasons for failure

  • Growing too fast too soon
  • Franchising for the wrong reasons
  • Lack of planning
  • Selecting the wrong franchisees
  • Lack of infrastructure and support
  • Failure to take proper advice

Review your SWOT

Do you have the key criteria you need to franchise

  • Developed systems of operation and staffing
  • Defined image and clear market position
  • Proven and successful business model
  • Sustainable market and source of ongoing clients
  • Easily duplicated management systems
  • Profitability for both parties
  • Mutual respect and support – partnership
  • Will your operating experience and culture allow you to develop a franchise operation?
  • Are your products or services suitable for franchising?
  • Is your Brand sufficiently well developed and strong enough to deliver a worthwhile advantage to a franchisee?
  • Is your financial position strong enough to support a franchise network?
  • Is your business system proven, robust and capable of being learned by a franchisee?

Information supplied by the Create Project



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