Franchise system development process

Many brands franchising for the first time are attracted to the illusion of signing up franchisees at the earliest and growing their outlet footprint in the shortest time. With few exceptions, many ask their lawyers to prepare a franchise agreement, which they quickly use to sign up franchisees.

The end result is normally a failed franchise roll out, with all the disappointments, blames and losses that come with it. A number of case studies exist in East Africa, including, with due acknowledgement and maximum respect to their owners, AAR Healthcare clinics which grew this way between 2004 and 2008 before the system collapsed, forcing them to revert to the brick and mortar model which they use to date.

Approaching franchising through only a franchise agreement presupposes that the lawyer preparing this agreement knows the business inside out, which is normally not the case. Lawyers, including the ones highly-specialised in franchising and IP matters, normally know only the legal aspects of the game and it is foolhardy for a brand-owner to rely only on a franchise agreement to run a franchise system. Indigenous East African brands currently claiming to franchise-from those selling tyres to beauty salons and many more- have made this mistake and, unless their model is different from franchising but they call it franchising, it is only a matter of time before they fail like their predecessors. In short, a franchise agreement is only one of the very many legal documents used to protect a franchise system that has already been built following carefully considered steps that guarantee long-term sustainability, given that franchising is more a long-term than a short-term strategy.

For the coming several weeks, our readers will learn how to build a robust franchise network system by following international best-practices that leading international franchise brands have used to build world-conquering franchise brands. The articles will cover the entire franchise development process starting at franchisability gap analysis, glooming to meet the franchisability threshold, systemization, setting standards and documenting operations procedures, prototyping, strategic franchising market research, franchising strategic/business plan, financing the franchise roll out, preparation of the numerous key franchising documents (including the franchise agreement), franchise opportunity marketing, budgeting of promotional materials used in franchise recruitment, preparing a budget for the cost of marketing the franchise opportunity, training team members to use the operating system and helping candidates make an informed business decision about your opportunity, franchise sales development including developing a profile of the ideal franchisee, establishing candidate generation strategies, designing a system for handling the candidate from initial inquiry through the signing of the agreements, creating promotional strategies, scripts, presentations and communications, educating appropriate team members on the legal issues pertaining to the Franchise Disclosure Document (FDD) and granting the franchise license and the creation of a franchise development department at head office.

The writer is a franchise consultant helping indigenous East African brands to franchise, multinational brands to settle in the region and governmnents to create a franchise-friendly business environment.