Name: Iftikhar Hussain Location: Edinburgh...
Faced with a difficult economic outlook and likely rising unemployment how do we move forward as a nation?
Clearly franchising is still proving effective in terms of new start ups, low failure rates and active campaigning by the BFA to highlight all the good things being done. However prospective franchisees need to do a lot of the hard legwork to determine when and where to invest their hard earned cash.
You would not set off driving from Southampton to the South of France without a route map and it’s the same for a business. You need a route map to highlight a number of key areas to concentrate on and you need to look at what franchisors can do to assist.
All the usual planning areas need to be covered, the proposition, routes to market, ideal customers, sector analysis, working capital needs etc. Ideally what a franchisee wants is low initial investment, proven recurring revenue lines from multiple sources at good margins with enduring customer relationships – so far so easy!!
Clearly franchisees will need to speak to other franchisees about the level of support, training, business development assistance provided and the quality. Franchisors not wishing to share this information should be avoided!!
There is also no short cut to considering the usual big questions, where is the market in my sector now, where is it going, what is my competition and where do I fit in and make a difference?
Always try to expect the unexpected and have a contingency plan to deal with the event are wise words.
The value proposition and differentiation is more important than ever and the franchisor should be able to clearly articulate this, and you should be looking to validate those statements.
Do not be afraid to ask about exit strategies and resale history from the outset as ultimately a franchisee will be looking to make income returns annually and no doubt capital returns over a period of time.
The old favourite business plan heading of SWOT analysis (strengths, weaknesses, opportunities and threats) is still more important than ever. Firstly, so franchisee can articulate these areas to a bank manager to obtain funding but more importantly so they can gauge the likelihood and impact of risks and how they affect decisions about the business in the future. Always try to expect the unexpected and have a contingency plan to deal with the event are wise words. Social, technological and economic charges are fast moving, so consider what your business will look like in 6 months and 3 years – you may be surprised what could happen!!
Future articles will look in more depth at a number of key areas of business, the challenges faced and tips to avoid the traps, but for now brush off those road maps and ask questions.