More haste less speed

Potential franchisors are often in a tremendous rush. Many of those who contact us have the same questions at the tops of their minds:

* A quick steer on where to set the fees
* How to get a franchise agreement and operations manual drafted.
* A fast track to recruiting franchisees.

In some cases, the urgency is just a case of their impatience to get the show on the road. Too often it is down to the emergence or insistence of a would-be franchise partner. Increasingly, it is the result of pressure from the business management or shareholders to realise the commercial benefits which franchising offers - such as a lower cost operating model and way to fund further growth.

Over-exuberance can, however, be very costly at this important stage of development. Let's just look at the reality for a moment:

* There is no magic number as far as franchise fees are concerned. Fees and charges cannot be set if it is not clear how the franchise system will operate in practice and who exactly bears which costs. You must also take into account the available margin to be shared.
* An operating manual cannot set out the 'success factors' of a franchise relationship if those have not been distilled.
* A specialist franchise lawyer will require input on the commercial terms particular to the individual business and partnership to insert into the franchise agreement - they will not be able to pull these commercial terms out of the air.
* Appropriate franchisees cannot be recruited if you have not established the full scope of the franchisee's obligations and so the resources and profile of the partner you need to work with.

The launch of a franchise business means more than just creating a new channel for distributing existing products or services. It is a new form of business venture in its own right.

As a franchisor, the extent to which you earn from the endeavours of your business partners or franchisees will depend on the strength of the business model on which the franchise is based. Franchising is a business partnership - so a careful balance needs to be struck between the activities and earnings potential of both the franchisee and the franchisor. While there are a number of key principles for developing a sound franchise business, and the ethical standards as promoted by the British Franchise Association to guide the way, no matter how hard you look, there is no simple blueprint for this type of commercial relationship - and don't believe anyone who says there is.

Award-winning franchise businesses tend to be those whose management has taken time to understand the nuances of the franchise business model and how to harness the dynamics of working with business partners to everyone's advantage.

To create a business growth solution which is right for your business, the first step is to get all the facts on the table. The starting point is to consider the pros and cons of adopting a franchising approach, taking into account:

* Your trading history
* The market opportunity and your goals for penetrating that market, or for converting existing operations•Your current and planned management team and business 'culture'
* Your financial position.
* If, after this early commercial 'audit', you are convinced franchising is indeed an option, then early groundwork can begin to tailor the franchise to your own particular business needs. In particular:
* Creating a clear definition of the nature of the 'concept' you wish to franchise.
* Allocating franchisor and franchisee responsibilities - who does and pays for what?
* Scoping the resources and skills needed centrally to launch and then support a franchise network.
* Evaluating and prioritising potential franchise territories.
* Assessing the financial viability for both parties - and setting those fees.
* Setting out the commercial terms to brief a franchise lawyer on the nuances of your specific franchise.
* And last but not least, putting together a task list or project plan to get you from concept stage to the reality of a profitable, stable franchise business and network.

Going through a process such as this not only puts you in control as a potential franchisor, it sets the tone for a solid and successful business development programme - one that we would expect to make the headlines for all the right reasons.

About Max McHardy

Max McHardy is a director of McHardy & Co, a member of the BDO Stoy Hayward Alliance and specialist advisers on franchise and other forms of business alliance solution.

Tel: 020 7372 9128

Mobile: 07798 818 286

e-mail: max@mchardy.biz

Web: www.mchardy.biz and www.bdo.co.uk