by Eric Parker and Sasha-Lee de Bod

Throughout the years franchising has evolved over a spectrum of owner operator mechanisms, where it started with very loose control by the franchisor versus the strict control of Business Format Franchising we see in franchised networks today.

This form of franchising is used where product/tradename or licensing does not allow for the franchisor to exercise significant control over the delivery of the product to the consumer.

Business Format franchising provides the framework to facilitate uniformity and consistency throughout the franchised network, by the franchisor requiring that the franchisee adheres to a comprehensive business format.

Business Format Franchising is when the franchisor grants a license to the franchisee to:

  • trade under the trademark/tradename of the franchisor
  • make use of an entire package, comprising all the elements necessary to establish a previously untrained person in the business including training and operation manuals
  • Business format franchising is imperative where the product/service requires personal service in its delivery to the customer. Furthermore, the franchisor should be able to control standards in such a way that the delivery of the service or product to the end-user meets the message conveyed through marketing.
  • In return for the intellectual know-how that the franchisor shares with the franchisee, up-front and ongoing franchise fees are commonplace.

Why use Business Format Franchising in your network:

  • Standardised systems and procedures
  • Strict adherence to standards
  • Standardised outlet design, layout and corporate image
  • Standardised product offering
  • Standardised marketing/promotions
  • Standard Training
  • Standard price strategy
  • Biggest differentiator is standardised point of sale systems and access by franchisor

How to reach Business Format Franchising Status for your network

1. Name the project

Think of a creative name for your project to get everyone involved and motivated

2. Develop a win-win business plan

  • It is important to get buy in from your franchisees and current network
  • This can be achieved by
    • Presenting the business plan to them
    • Conducting workshops and surveys as well as forming/implementing a franchisee council

3. Optimise outlet/s

It is important to show a realistic return on investment.  A good franchise opportunity in the current economy will give a franchisee a 3-4 year pay back, after they drew a market related salary.  Optimising an outlet includes the following:

  • Size and position
  • Layout and design (the image or look and feel of the outlet/brand)
  • Product and/or service range unique to franchisees
  • Staff training
  • Price strategy – favourable pricing for franchisees
  • Systems and controls
  • Marketing
  • Expansion plan – identify the gaps

4. Conduct a financial analysis

It is important to conduct financial analysis for:

  • Franchisor viability and sustainability
  • Franchisee viability and sustainability
    • New franchised outlet
    • Existing franchisees

5. Develop a usable and compliant franchise package

The franchise package should be usable and compliant to Consumer Protection Act Regulations and FASA guidelines.  The franchise package should include the following documents:

  • Operations and Procedure Manual
  • Franchise Agreement
  • Disclosure Document
  • Franchisee Council Bylaws

6. Franchisee support structure

There should be a support structure in place for the franchise network, which not only includes intensive ongoing support but training as well.  The key positions include:

  • Franchise Manager
  • Field service consultant/area managers

If you need assistance with business format franchising contact us