What is Franchising?
As stated by the British Franchise Association (bfa), “business format franchising is the granting of a licence by one person (the franchisor) to another (the franchisee), which entitles the franchisee to own and operate their own business under the brand, systems and proven business model of the franchisor.”
So, what is business format franchising?
Well, put quite simply, it is a business relationship where one party, the franchisor, allows another, the franchisee, to operate clones, or copies, of a proven business system in return for initial and ongoing fees.
The franchisee is allowed to operate a branch of the franchisor’s business using the latter’s business name and business systems.
The franchisor has a duty to select suitably qualified franchisees and then train them and support them in operating the business system.
What businesses are suitable to be franchised?
In advising whether a business can be franchised either in the UK or Internationally we look for five key criteria:
A business which is proven to be successful in an established format, with a defined system, and a distinctive name and appearance
A business which is easily duplicated – which means it can be set up in enough locations to create a network which is manageable and profitable
A business which can be easily learned in a reasonable period by someone with the required knowledge, skills and attitude to fit the desired franchisee profile
A business which creates enough profits to satisfy both the franchisor and the franchisee
A business which has, or can adapt to, a culture of mutual support and trust and in which the franchisor recognises their responsibilities to assist appropriately qualified people to create and operate businesses using a common brand and system
If all these criteria exist, then it is likely that the business could be franchised. If the business already franchises in the UK the process of franchising internationally will be easier as many of the systems and processes will already have proved themselves in the domestic market.
Whether at home or overseas the very fact that the business system has already proved to be successful means that the franchisee has a much greater chance of establishing a successful business themselves and the franchisor benefits by being able to grow their own network more quickly.
However, there are some other issues which must be addressed when consideration is given to franchising internationally.