Whether you are a franchisor or a franchisee, there are several important considerations to take into account before entering into a franchise agreement, as Christian Salloum, founder and managing director of BrandPortunity Hospitality Consultancy, points out.

The ultimate goal of the hospitality industry is to provide customers with enjoyable and memorable experiences, whether it’s dining out, relaxing at a luxury spa or having a blissful night’s sleep. Attention to detail matters.

Build a strong brand
To retain customers and franchisees, your franchise needs strong, identifiable branding. A convincing brand contains many parts, including the company name, logo and a strapline. Creating a shop front with colors that are instantly recognizable is essential. For example, McDonald’s is well known for its yellow arches. When you franchise your business, it is important that the overall look is unique and easy for franchisees to replicate. You might even want to consider an upgrade to make the branding more appealing.

Plan for franchising success
It’s vital that you develop an intelligent business plan. Franchise success lies in the hands of the franchisee. The million-dollar question is: “Will the business work as a franchise in practice?” You will be making many critical decisions, so it’s imperative to have a robust strategy in place. As part of your business plan, you need to ensure sufficient profit for your franchisees after deducting business costs, royalties and other typical franchise expenses. A business plan provides essential information to develop a watertight financial model.

Create a competitive advantage
Creating a competitive advantage will make your brand stand out. Consider each aspect of your franchise system: product offerings, service, the experience you will offer your audience and your key differentiators. By executing this phase successfully, the world is your oyster.

Duplicate what makes your business successful
Franchisees operate on behalf of the franchisor. To achieve success, the franchisor must consider all obstacles the franchisee might face and provide relevant management support and training. To realize the same success, the franchisee will replicate the parts of the business that make it successful. If you cannot replicate these elements, the franchisee must adapt to the market and consumer behavior by understanding needs and preferences.

Know the pros and cons of franchising
Less capital is required to establish a franchise network because the franchisee invests in opening an outlet and is responsible for managing staff and day-to-day operations. The franchisor retains control over the franchise while the franchisee maintains the business. The franchisor is obliged to provide the franchisee with operational training, support staff training, advertising and consistent development and improvement of the franchise systems to ensure profitability. Franchisees that are underperforming can be troublesome and time-consuming to deal with.

Be smart with advertising
There is no doubt that strategic advertising and marketing positively impact sales and growth. Potential franchisees can gauge the success and attractiveness of a franchise and see the significant advantage that franchise networks have over independent businesses.

Select the right franchisees
Franchisees are the lifeblood of any franchise system. A franchisee that lacks skills, commitment or capital could cause the franchise to fail and damage your overall reputation. Ensure that you choose your partners wisely and have well-designed procedures in place for successful franchisee recruitment.

Ensure all franchisees succeed
Steady, well-planned and considered growth equals profitability, as opposed to ambitious expansion, which can lead to franchisee failure. While establishing new franchisees is important, nurturing existing ones is essential.

Ensure franchisees are compliant
A franchisee is an owner of a business rather than an employee. A strong culture of compliance highlights the benefits you can provide, including experience, knowledge and investment to improve your business’ value and growth potential. Ensure that adequate, consistent procedures are in place across the entire franchise. Consistency in customer service leads to customer trust and repeat business, attracting potential franchisees.

Set up open lines of communication
Good communication with franchisees helps to ensure compliance. Provide support for franchisees and obtain feedback to improve your franchise system steadily. Schedule several meetings and annual business reviews to highlight the positive impact of the brand in the market, and plan any required improvements and/ or enhancements of the product/service offering in a particular market.

Know your legal obligations
When developing a franchise system, you should consider applicable laws, particularly franchising code of conduct legislation. It’s crucial to obtain detailed advice about how the laws affect the various aspects of your franchise. Consider the structure of your business and how you own the assets associated with your franchise. The franchise agreement and disclosure documents should be at the core of your legal considerations.

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