Would you like to set up your own franchise system? We’ll show you how to do this in 10 steps.
10 Steps to Build Your Franchise System
1. Develop a business idea
The best business ideas arise from the lack of a solution to a specific problem. Developing a good business idea is therefore not that difficult. We all know situations where something doesn’t work as it should. Or the product or service we are looking for just doesn’t exist yet.
So the best way to develop a business idea is to look around in your environment. What can be improved where? In order to decide whether your idea is worth anything, we have put together three criteria that your idea should meet:
You must be enthusiastic about your business idea.
In order to develop and successfully implement your business idea, you need time and a lot of back-breaking work and perseverance.
It can take up to 3 years for a company to establish itself. During this time, you will continuously adapt and improve your idea.
It is therefore important that you identify with the basic idea of your business model and are enthusiastic about it right from the start. You can only stay tuned in dry spells if you have a passion for your idea.
There has to be a market.
For you to be able to earn money with your business idea, you need a clientele for your product or service.
The demand determines success, not the supply. You can find more about the market analysis in the section “Analyze the market”.
You have to be able to implement your idea.
The best and most innovative idea is of no use if you are unable to implement it. It’s good to be visionary. Visions are an important building block for progress. Nevertheless, your project must be realistic.
2. Analyze franchise suitability
If your business idea meets the three criteria mentioned above, you already meet the basic requirements for franchise suitability.
They offer an attractive existence for potential franchise partners.
3. Franchisees: Who is it suitable? Create a profile
Get the clearest possible picture of your ideal franchisee. This gives you more security and fewer costs later when choosing your partner. Criteria for the ideal franchisee could be:
- work experience
- Skills (both performance and qualifications)
Characteristics such as open-mindedness, sociability, willingness to learn, leadership skills, willingness to take risks and teamwork skills must also be taken into account.
Anyone who knows potential franchisees personally has a good chance of assessing the future partner with regard to these criteria.
You should also start thinking about how you would like to acquire potential franchisees at this point.
4. Analyze the market
Before starting, analyze the market and your target groups. Do intensive market research, observe the price development and obtain information about target groups and competitors.
From this analysis, derive concrete measures for the distribution of tasks, organization, communication and scheduling.
The following aspects speak for the multiple abilities and thus suitability as a franchise:
- Profits above the industry average are already possible in the first few months.
- There is potential for purchasing advantages from suppliers.
- The entry costs for the franchisees are attractive.
5. Create a marketing concept
The marketing concept is the core of your franchise package. In the marketing concept, you create a memorable brand for your system by describing your procurement, range, marketing and location policy in detail.
So you describe your identity in the marketing concept. What is your identity, and how do you differ from your competitors? The marketing concept also includes all details for conditions for rental contracts, advertising or distribution.
6. Formulate the business concept
In the business concept, state what you have already thought about: How should the franchise business be run? What criteria should franchisees meet? Which advertising and sales activities do you use to acquire new customers?
7. Draw up a system plan
Prepare the budget for your system and develop a liquidity and investment plan. Define how your system should be organized.
8. Test the system
Test the market feasibility of your business concept as part of a pilot operation. Use the knowledge to improve your system.
9. Draw up a franchise agreement
The franchise agreement is the legal basis for your contractual business relationships with franchisees. Draw up the contract with the help of a specialized lawyer. Central elements of the franchise agreement are:
- Right to use know-how, brand and image
- Obligation to execute the corporate strategy
- Fee payments and financing
- Obligation to adhere to the corporate identity
- Obligations and support from the franchisor
10. Perform cooperation tests
You are now at the last step: test your system in the final phase with 4 to 5 franchisees.
This test phase shows whether the support provided by the system headquarters is working well, whether you have selected the right franchisee and whether the franchise agreement covers all important points.
More advice about your business idea
As explained at the beginning: It takes time, work and perseverance. The following tips will help you on the way to building a successful franchise system:
- Be courageous: Without courage, no business idea can be developed and implemented. There is always a risk – but the world belongs to the brave. Courage is an important quality for every self-employed person.
- Learn from others: Well copied is better than badly implemented. Look around and learn from others, for better or for worse. Learn from and avoid the mistakes others have made before you. In this way, you can avoid some hurdles without having to tackle them yourself.
- Take advantage of digitization: The digitization of the economy is a revolutionary force that will continue to change the economy. When building your system, think digitally and future-oriented. Think about what can still be digitized.