Removing the mysteries
Franchising is a great way to carry on business – and there are many more businesses “out there” that are franchises than are generally known to be. So, what’s it all about?
At its simplest, franchising is a way of you getting into business quickly, by using the ideas, etc of another business. Let’s say that a company sells goods (widgets) in Towns A and B. They want to open in Towns C, D & E, and can either do that themselves or create franchises so that someone else can open there.
As a franchisee, you get:
- Exclusivity for a defined geographical area (by map or post code) – and that’s why franchising is harder to get right for virtual (rather than physical) sales.
- A contract (or the like) setting out your rights and theirs – such as:
- Purchases of widgets only through the franchisor
- Other things you have to pay: lease costs, marketing or whatever
- What the franchisor has to do – doing the marketing for example
- How long things last for
- What happens if things go wrong, and
- Most importantly, what you pay to get the franchise.
- And all the paperwork will be standard form because the franchisor won’t want to have to remember doing differing deals for different people. It follows that negotiating of “special” rights is usually somewhere between difficult and impossible. That’s one of the reasons why we tend not to suggest that prospective franchisees waste scarce cash on arguments that they are not going to win – but instead make sure that they are fully informed before they “sign up”.
But, bear in mind that the franchise fee (or whatever) is payable throughout the life of the franchise. So, there is no point grumbling about paying it 10 years after you start because by then you know it all. Your options are:
- Sign up and pay, and by doing so get into business quickly, or
- Don’t sign up and don’t pay, but get into business slowly.
In some ways, the franchise fee can be looked at as the alternative to doing your own marketing and watching sales build up over time.
We’ve done a lot of franchising work in the last 20+ years, so have a good feel for what works – and what doesn’t. So, if you are interested in having a chat about this whole area, get in touch.