The prime criteria to understand a prospective franchisee is to understand if they have the finances required to start franchise. The franchisor will also need to understand if the location of the franchise business is apt for the brand. This will help them understand if they can retrieve the number of profits it has planned for the franchisee.
There has to be a clear discussion on the amount of royalty to be paid and in what time period. There are 10 steps which need to be attended when a brand is expanding through franchise mode, let’s see below:
Steps to Franchise
1) Vision, Mission and Goals – It is important for the franchisor to understand and also create, a set vision for the brand. Vision of the brand refers to putting down the reason for the brand to exist and final goal for franchise. For example, the vision statement for a Burger and Pizza chain would be – to serve the best burgers and pizzas. At a global level and not only in the home country.
The mission for the brand would be how to take corrective steps to achieve the vision statement of the brand. There are short-term goals for a franchisor. i.e. setting up your own franchises in your locality, city. Regardless, in which the brand originated and later looking at expanding to other states and cities in India. The goals of the franchisor would be to understand the vision and mission of the brand and draft plan in order to work and achieve the mission and vision of the brand by expanding via franchise or setting up their own stores.
2) Business Franchise Registration – Once the brand is able to set the vision, mission and the goals for the brand and also has established a model in order to give franchise and work on the goals of the brand. The brand has to now look at registering the venture at a government body in order to get all the legal formalities done and also legal protection for the business.
Requisites of brand registration in India:
- Brand name: Refers to having a unique name for the brand, which would be in sync with the products or services they are known for. Doing this will help the brand to be on a top of the mind. Also, this will create an identity in the industry.
- Trade Mark: This refers to a recognizable sign, design, or expression, which identifies products or service and even the brand name of a particular company. This secures your identity from unethical use. Trademarks used to identify the services referred to as service marks. The trademark owner can be an individual, business organization or any legal entity. The other requisites are brand names, private limited vs proprietorship, domain registration, social media presence. Having a domain of the same name will do good for the brand, as it will be easy for anyone to recall the brand based on having a domain of the same name.
- Social media presence is a must, according to the current marketing trends it is important to have an online presence. Now your initial steps are complete to register the brand. Next comes…
3) Prototype Development – Before expanding via the franchise mode, this is the most essential step. It is good to have an existing store which has been functioning for over a period of 12 – 24 months. Doing this will help the franchise consultant build a franchise plan as per the functionality, rules and workflow of the further franchises which would be let out. In case you don’t have a running outlet of your brand, then it is always advisable to first establish the outlet and monitor the functioning of it. This will help you in analyzing the performance of the brand and the improvements required.
4) India Franchise Business Plan – While designing the franchise plan, your brand should be franchise ready. The major segments to focus on while planning is – positioning the audience, defining the demographics and more. The business should be in a position to fulfil the demand of the customer as per the demographics of India.
5) Franchise Financial Model – As now you have defined your audiences and demographics, it’s crucial to set a financial plan for your franchising. Outline the financial projection which is beneficial for your business and the franchisees. Sketch the required investment for setting up a new outlet of your brand. Furthermore, calculating the return on investment, revenue generation, profits and other financial requisites.
6)Franchise Model: Basically, there are four different types of franchising models. This includes FOFO (Franchise Owned Franchise Operated), COCO (Company Owned Company Operated), FOCO (Franchise Owned Company Operated), COFO (Company Owned Franchise Operated). You can choose the most ideal model for your brand. The decision should be made while considering the financial plan, audiences and demographics.
7) Franchise Profiling– Franchise profiling refers to defining the roles and responsibilities of each franchisee and also making a mention of their task to be performed on a timely basis be it every day, fortnight etc. The franchisor should understand the skill sets required for the business and is it there in the franchisee too for them to handle the franchise and also run it successfully.
8) Franchise Marketing – It is important for the franchisor to understand which is the best platform to market their brand. Also understand, what marketing activities are to be done, in order to get a prospective lead for their franchise. Franchisors can make use of franchise portals, exhibitions, giving an ad in newspaper and franchise journals. The marketing budget should be predefined in order to understand the best use of marketing platforms to get the desired result in the franchisees.
9) Franchise Agreements – The franchise agreement is the most important document between the franchisor and the franchisee. Therefore, the franchisor should prepare franchise documents in such a way, which mentions an equal authority to both the parties of the franchise to handle the franchise independently.
10) Franchise Manual – The franchise manual refers to a document drafted by the franchisor for the franchisee to understand the functionalities of the franchise. It also should include the details related to the operations of the franchise. The manual will define the type of training provided to the franchisees; and the training details for the employees or staff appointed by the franchisees. This will guide the franchisees and their staff about the company ethics, business type and their roles and responsibilities.
11) Commitment – It refers to the fact that it is the franchisor commitment towards making the franchises function successfully. It is vice-versa as well. A consideration of both the parties is a must for the brand to establish itself successfully as well as sustain in the market, and standing strong against the test of times.
Understanding the intricacies of a franchisor and franchisee relationship is hard. The role of franchisee and franchisor is equally important to establish a brand successfully in the market and also run it with equal importance. With the above points, you can understand the importance of franchisor and franchisee in a franchise business. We at Sparkleminds with over 20+ years of experience and having worked with thousands of brands, we exactly know what would be the best for your brand, be it developing a franchise model, working out a franchise agreement, hiring and training of the workforce. We also provide support in developing a marketing manual, franchising profiling and a lot more.
