Generally, the answer must be a resounding ”yes”. Seeking input from qualified outsiders will bring an extra perspective to the business to be franchised and help the prospective franchisor understand the intricacies of this step. Initially, the consultant will help the franchisor to decide whether franchising is right for the business and its culture. If so, he or she will advise on developing the franchise package. Several professions can become involved, most often a franchise consultant, an accountant and a lawyer.
Generally, the services offered by franchise consultants include:
- Help with the feasibility study.
- Help with the franchise plan, essentially a document not unlike a business plan but with the focus firmly on the development of the franchise.
- Guidance for the creation of a professionally compiled franchise package (in this order):
- the drafting of the operations and procedures manual
- the drafting of the disclosure document
- the creation of a brief to enable a qualified attorney to prepare the franchise agreement
- Advice on access to funding sources, both to fund the franchisor’s operation and to create a funding mechanism for future franchisees.
Prospective franchisors should look for a meeting of minds between the consultant and the company. Ideally, the consultant should be:
- a member of FASA and prepared to conduct the work in accordance with FASA’s Code of Ethics and Business Practices
- prepared to offer the franchisor an initial short assessment without cost or obligation
- able to provide references from previous clients, preferably within the same or a similar sector
- willing to give an estimate of costs involved, linked to performance criteria including progress markers and points of disengagement.
Ask a franchise consultant a question
Franchising Plus is one such innovative consultancy, continuously developing new products for the sector and actively researching trends in franchising.
Franchising Plus has over 40 years’ combined experience in the franchising sector and experience in the launching of franchised brands. Clients gain credibility with financial institutions and potential franchisees if using the firm’s services. Franchising Plus is committed to follow through and will assist with implementation of projects. The firm has a high visibility in the franchising sector through our publications and FASA board membership.
Perhaps the franchisor’s own accountant is able to help with creating the financials needed to plan the franchise – up to a point:
- Unless the accountant has proven expertise in franchising, he/she should limit his/her involvement to supplying financial information pertaining to the core unit, then hand over to a professional with franchise expertise. Alternatively, the consultant will be able to assist.
- The important point is that as part of this exercise, projections showing what franchisees’ financial performance will be like over time, and whether they can afford to pay franchise fees and still make a profit, needs to be compiled.
- These projections need to take the prospective franchisor’s projected costs of providing franchisee support into account. Unless the franchisor can make money from franchising, the business is not franchiseable. (An exception would be a business where the franchisor is the supplier of a key product. However, relying on this alone could create problems with the Competition Board).
Access a competent advisor here
For a summary of the steps involved, see more about creating a franchise network here.
The franchisor and every prospective franchisee must take competent legal advice. Contrary to what some inexperienced prospective franchisors might think, an effective franchise agreement cannot be compiled in-house, and no, copying another network’s franchise agreement won’t do either. Precisely because South Africa does not have a body of laws that governs franchising, it is vital that the attorney you consult has experience in these matters.
Get in touch with a competent attorney here.
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