A franchise can be described as a business incubating programme. In exchange for an initial investment, an entrepreneur will receive a portfolio of training; support and guidance to help get them establish their own operation successfully. This business should mirror that of the franchisor and so minimise the risks of starting a business.
What can you expect to give/receive?
An initial fee is paid to enter the franchise programme; this will vary depending on start-up location as some countries have more complex regulation and red tape. In addition to this, there is an ongoing ‘royalty’ payment on all the income generated through the business which is paid back to the franchisor. The amount charged for the initial fee and the royalties will differ from franchise to franchise. Any entrepreneur should also expect to factor in other typical business set up costs such as office rental, telecom charges etc, these fall outside the typical franchise arrangement.
The raft of benefits you should receive as an entrepreneur (franchisee) is considerable, not only guidance on the first business planning stage but have support through each stage on how to conduct the business. As a Franchisee, you are granted a licence to trade under the brand of the Franchisor. Marketing support, recruitment training and IT support are “standard issue” with an Antal on boarding as is full access to the Company system via the intranet. At Antal International, we are unique in that we also offer our Network offices the possibly to plug into our business eco system to start sharing business and working together on regional or global procurement projects from day one.
How can you develop a franchise and what value will it deliver in the future?
If you have a strong business model, operating in your niche with stable results consistently for a number of years the question of expansion will no doubt surface. It is at this point, when you have a proven track record, that you may consider your options to open more offices, expand through mergers or acquisitions or, as in the case of Antal International – explore the route of franchising.
In this process, you need to develop a system which clearly signposts and guides an investor on how to successfully lunch their own business, replicating the key steps you prescribe them to follow. In the case of Antal International, our franchise model was developed after many years in the business. It has continually being developed over the last 14 years to the mature stage it is at today.
Getting the right structure, team, processes and methodologies in place is important as is having a sound, fair and robust Franchise Agreement. Needless to say, franchising is not a process which should be taken lightly, in-depth research with expert advice is of paramount importance. The British Franchise Association is a good starting point.
Now for that elusive quest for return on the investment from a franchise system! I can tell you that it is a slow burn; you cannot expect to see healthy returns on the significant ‘sunk costs’ for at least for first few years. There are a number of reasons for the slow return, one being the sheer volume of time and capital you need in the first place to make sure the franchise offering is sound and has substance.
How can you get the maximum value?
It starts at the very beginning with the careful selection of your franchisees, get this right and the relationship between franchisee and franchisor will be seamless. Where there is a good fit and you have a franchisee with aptitude, will and able to apply the franchise model, a new office should be up trading, sending invoices to clients within the first six months. Working closely with the franchisees, listening to their feedback and having an open mind to continuous improvement also helps get the highest level of return for the both the Franchisee and Franchisor.