FRANCHISE: Powerful growth tool for family businesses

In comes franchising! While many other sustainability models exist, few, if any, match franchising. By its very nature franchising creates a strategic alliance between independent parties all working to achieve a common goal. And in-there lies the hidden jewel-transparent structures needed to franchise, force-multiplication and spreading the family wealth out to bake a larger cake that ensures a larger piece for everyone.

Preparation towards franchising is a rigorous process that forces businesses to put in place transparent and compliant governance structures that ensure long-term growth and sustainability.

First, when you start franchising, you shift from working IN to working ON your business. After legally protecting your brand’s intellectual property, you proceed to perfect all business systems — leadership, management, finance, sales, delivery/operations, marketing and branding — to achieve scaling through replication by the many franchisees joining your franchise system. Your business as a whole becomes the product, as opposed to your earlier focus on the individual items you sell in each of your outlets. Secondly, an independent board of directors is required to drive strategy in the alliance.

Oftentimes, a separate company is incorporated to own the franchise network, which is then licensed to use intellectual property owned by the original family-owned company which continues opening company-owned outlets to keep tabs with happenings on the ground. Both the family-owned and the new company need independent boards to secure governance and assure franchisees of sustainability. Thirdly, the hitherto family business has to comply with all regulatory and legal requirements including taxation, otherwise franchisees will not comply with your own standards.

Fourthly, it has to open up its financials (at least last 2-3 years) and other disclosures required in the Franchise Disclosure Document (similar to a prospectus in an IPO) to the scrutiny of prospective franchisees who seek assurance that investing their time and money in the family franchise will help them achieve personal and financial goals.

Fifthly, a Franchisee Council is set up to tap franchisee innovations and as a structured communication channel with franchisees. This ensures constant life in the network. Sixthly, replicability and scalability. The franchisor’s success formula is spread across more than one centre (the franchisees) thereby acting as a force-multiplier for the family matriarch to ensure sustainability. Seventhly, franchising opens up the family wealth to other investors. While this may seem bad initially, it allows multiplication of this resource, thereby baking a larger cake for everyone (even though the individual share may be smaller) unlike in a family-owned set-up where you own a big piece of a very small cake!

Finally, any franchise worth its salt has to join the franchise association. The association acts as a self-regulatory framework for the franchise industry. All franchise associations are guided by the Code of Ethics of the World Franchise Council, the world apex franchise associations’ body.