The need to understand how to franchise

To answer the question why franchise, one of the biggest reasons is the existing company would already have built a certain market reputation due to its brand and also would be following certain standard operating procedures, so that one does not have to spend to start the business. These operating procedures would have been formed after trials and errors made by the franchiser (original company).

For setting up a franchise, collaboration is required between the franchiser and the franchisee. The franchiser owns the business, has a proven business model, with established business systems and a training and support team, whereas a franchisee is an entrepreneur who brings in his experience, capital investment and knowledge to rapidly expand the business.

While considering how to franchise, the franchisers need to evaluate a country’s GDP, per capita income, general population statistics and health of the country’s economy before entering it for business. The existing demand for a franchiser’s goods and services needs to be checked, related vendor and supply issues are to be addressed, based on which it can be decided whether to enter the country or not. Franchising laws also vary from one country to another, and comprehensive research needs to be done before entering new territory. Careful study of culture also should be conducted, to ensure that the brand integrates well with local consumers.

There are many other concerns that need to be addressed while trying to figure out how to franchise. The business needs to have certain characteristics that separate it from the competition, to understand measure that need to be taken in the future. Managers may be required in different locations, so that they can service local communities. Profits need to keep coming in, since that is always the primary objective of any business. To finalize the franchising process, a form of franchise agreement and a franchise disclosure document must be formed. The disclosure document describes the franchise agreement in simple language, along with audited financial statements of the franchiser, and much more.

For answering the question should I franchise in the positive, the following conditions must hold true. The business lacks adequate capital and people to make it grow, or it has the potential to grow faster through company-oriented growth programs. An existing distribution system may require supplements, or tighter control may need to be exercised on these distribution systems.