When does it make sense to create a franchising concept when expanding your business? The starting point for the creation of a franchising concept can only be the original business project, successfully verified on the market in at least one of its own (pilot) operations for at least one year.
Table of Contents
Conditions And Criteria For Creating A Franchising Concept
In comparison with these minimum conditions, which are determined by the Code of Ethics for Franchising, in practice, when assessing the possibility of business expansion by the franchising method, more demanding conditions and criteria are applied to new franchising business plans and projects. Here is an overview of key points:
- A business project that is the subject of a (future) franchise concept must be credible – it must have an impeccable provider.
- Executive concept management must have sufficient practice and experience in the business area.
- The concept (brand ) itself must be known in the professional public and on the market, positively perceived in the area of interest of the expansion and adequately presented in the media and on the Internet.
- The new concept (its outputs) must be unique in its own way, it must be different from the competition and have a significant competitive advantage over the competition.
- It must have procedures in place and an overall output delivery system that is reproducible.
- Individual processes, technological and logistical procedures must be formally documented or documentable. They should be elaborated in detail in operating procedures and manuals so that they can be practically and easily introduced into production, sales and implementation on the market in a reasonable time.
The Implementation Of The Franchising Concept Must Provide Both The Franchisor And The Franchisee With A Sufficient Return On The Investment
If the return is not sufficient and reasonable, the franchise will not be satisfied and the partnership system will fail. The basis of every franchising concept is therefore a business plan, in which the possibilities and limits of the franchising project in question are verified.
In The Development And Expansion Of The Franchising Network, The Business Creates A Separate One For Each Franchise Operation
Cost and revenue items are not the same for individual operations of the franchise chain. Therefore, when compiling a specific business plan for a new operation, the values of actual cost and revenue items from the pilot operation will be used appropriately. Baseline data, formulas and tables for compiling the economic model of franchising operations are part of the franchising concept.
In The Calculation Of The Expected Economic Result Of The Franchising Operation, The Decisive Variable Is A Realistic Estimate Of Its Future Turnover
The accuracy of this estimate depends on the actual fulfillment of the expected projected economic indicators, the economic result and thus also the degree of business risk and the probability of achieving future operational success. The economic result projected in the business plan of the franchise operation is also a starting point for setting appropriate franchising and license fees.
When Is The Right Time For Franchising
If you run a more efficient business for a long time, you offer a product that has sales potential and you are interested in expanding, you can start thinking about using franchising and creating your own franchising concept. We will be happy to advise you.
Also Read: The Importance Of Impairment Losses For Your Business
