Tips for Franchising:
- It is difficult to do franchising if it is a non-scalable business model.
- Franchising business needs a profitable business model, proper SOPs (working processes), obtaining business support from legal and headquarter, with proper marketing strategies and promotions.
There are many Franchise businesses in the market, and usually people think that it is a smart way to make money.
But in fact, not every kind of business is suitable for franchising!
There is an existing client who approached us (3S Adviser) to seek advice about expanding his current business into a specialty store and promote it in the form of franchising.
However, we told him very frankly that his current business is not suitable to do so after discussion.
The company sells natural plants and related processed products, which is a niche market that only focuses on a small and defined target audience since it is not a daily necessity.
In our opinion, if you simply set up a specialty store, no matter how magnificent the shop decoration is, no one knows what it is. In addition, this kind of product is not a necessity and easy to be forgotten by the consumers.
Will there be franchisees?
Moreover, their premium price positioning may restrict their marketing strategies and promotion may be slow. It will affect the speed of market penetration and they could not reach a certain level of market acceptance for better results. Thus, it will be difficult to operate in the form of Franchising.
Therefore, judging with common sense, will there be any company interested to invest a sum of franchising fees for such a business model? It is not only limited to franchising fees, but also other operations related fees and costs.
As such, we believe that more than 50% of the business partners would not be interested. If there is no one interested to join as franchisee, it hardly transforms the business model into franchising business, even though there are challenges of business operations that need to be discussed as well.
We believe that many business leaders out there who are interested in diving into the franchising market may have overlooked such issues.
Thus, check out the 6 major stages to create Franchise Business Plan below first if you are really interested in Franchising business:-
1. Business Model: Create a profitable business model and brand.
2. Work Process: Develop standard operating procedures (SOP) that allow franchisees to follow and pick up easily.
3. Support from Headquarter: Develop a strong operation network to support all franchisees/investors for business operations and development.
4. Legal Support: Engage a lawyer who is familiar with franchise law and regulations to draft/review your franchise agreement carefully. Being a franchisee, which is bound by contractual relationship under a franchise agreement for all responsibilities, obligations, norms, interests, etc. need to be clearly regulated and explained.
5. Legally Registered: All companies/businesses that are looking into Franchising need to apply and obtain license legally as Franchise & Licensing laws and regulations are applicable in Malaysia.
6. Marketing Strategies: The final stage is design and promotion. The company needs to develop franchise instructions and investment promotion.
Back to the client’s case, is it really impossible for them to expand their business to a franchising business model at all?
It is not true, however, they should adjust and transform their business model first before proceeding further, which refers to the first stage of creating a franchise business plan as mentioned above.
While adjusting the business model, we must confirm that the business model is suitable and beneficial to the franchisees as well, so that they could survive and make money along with the franchisor at the same time.
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