Becoming a franchisor. An ambitious but accessible choice.
Franchising is a business model that appeals to many entrepreneurs, particularly because of its favorable legal status and the opportunity to rapidly expand their business. The number of franchisors and franchisees continues to grow, and in 2020, this market generated 63.8 billion euros in revenue. It’s only natural, then, that many entrepreneurs are interested in this model and want to become franchisors. Are you an entrepreneur? Do you want to give your business concept new momentum by expanding through franchising? Do you have a unique approach to your industry? Do you want to launch your concept as a franchise but don’t know how to proceed? What steps should you take? How should you get organized? We’ll tell you more in this article. 1. Conduct a pilot phase “Franchising is the art of excelling at replicating averages.” The franchise system involves duplicating a concept that works across one or more locations. Before beginning the rollout, you must first test your concept in a real-world setting using at least one pilot location. This prototype will serve as a model for replicating your concept, so it’s essential that it accurately reflects what you want to convey. This pilot phase, conducted at at least one location over a minimum period of two years, must demonstrate and prove the economic profitability and viability of your project. The key is to test and refine in order to replicate more effectively! It is essential that your concept be not only viable but also original and innovative. This pilot unit will serve as your benchmark: it acts as your showcase, for presenting your concept to future franchisees or investors, for example. It can also be used as a training site for your franchisees and their staff. Is your prototype imperfect? Be patient and keep testing, because once the process is underway, it will be difficult to go back. It’s essential to follow all the steps and document the processes, as you’ll be compiling all these elements into the famous “Bible”: your operations manual. At the end of this experimental phase at this pilot location or these pilot locations, and if you’ve determined that your concept is replicable, you can draft your business plan: one for the network headquarters and one for a typical location. 2. Developing a Business Plan Drafting the business plan is an essential step; this document is crucial and will be of great use to you in presenting your project and convincing your future partners, financial investors, and franchisees. In fact, more and more franchisors are turning to investment funds to grow faster than their competitors, particularly in emerging or hyper-competitive markets where establishing themselves as the market leader is a major advantage. It is also a way to create value for your brand. Before or alongside developing this business plan, you’ll need to conduct market research to determine whether your project has a potential market and, most importantly, to identify the originality and uniqueness of your concept compared to existing players—your future competitors. This will allow you to assess your market potential and position your business. This market research should help you determine the maximum number of locations you can establish in a given country or region. Institutions specializing in franchising, such as the agency Territoires et Marketing, have been industry leaders for several decades and are virtually indispensable for developing this strategy (see https://www.territoires-marketing.fr/ for more information). There is no single template for a business plan, but since it will serve as your presentation document, it must include the essential elements needed to understand your project: Project description: market research, communication strategy, competitive analysis… Financial information: your business model, projected balance sheet, financing plan, necessary investments… 3. Drafting the Required Documentation As mentioned earlier, the franchise model can be very attractive to franchisors and franchisees, but regulations require the drafting of three main documents: the Pre-Contractual Information Document (DIP), the franchise agreement, and the operations manual. The Pre-Contractual Information Document This document is required by the Doubin Act of December 31, 1989. It obligates the franchisor to provide the DIP to the candidate before the franchise agreement is signed. Without it, the agreement will be null and void. It must contain certain mandatory elements, such as the company and brand profile, the brand’s history, information on the franchise agreement, and a national market study. The Franchise Agreement It incorporates the elements listed in the PID and defines the rights and obligations of the parties.It must be signed at least 21 days after the DIP. It includes essential information: the term of the agreement, the conditions for its renewal, the terms for the transfer of the franchisor’s know-how, the terms of assistance provided to the franchisee, the confidentiality clause, and other exclusive clauses. The Operations Manual It brings together the franchisor’s entire body of know-how. It serves as a tool for development, training, operations management, legal evidence, and certification. It is the result of the franchisor’s experience. It is therefore a true point of reference for every franchisee. The manual enables your franchisees to implement your methods and procedures in order to replicate your concept. It must therefore include your recipe for success, namely: your history, the concept’s idea, marketing elements, recipes, store layouts, and more. It is governed by three golden rules: it must be secret (confidential), substantial, and clearly identified. 4. Communicate and Recruit Franchisees Once your concept is ready to be replicated and all your documents have been formalized and drafted, all that’s left is to launch your marketing efforts and promote your brand to future franchisees and potential customers. If possible, you should use a digital solution that[…]
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