2018 Franchise Awards Q & A

Workingmums.co.uk held its third annual Top Franchise Awards last week. The awards ceremony was followed by a Q & A with business experts. They included Adam Knight, Head of Technology & Systems at Coconut Creatives; Amy Leite, Senior Associate at Aquabridge Law and an awards judge; Bal Kaur, Franchise Manager at HSBC; and franchise expert Steph Gutmann from Encouraging Women Into Franchising.

Many of the questions centred around social media. Adam Knight said it was important to think who the target audience was for social media posts and adverts and advised creating a profile of the ideal customer, “almost to the point of giving them a name”. “Trying to write something for everyone doesn’t speak to anyone,” he stated. It was also important to follow up with testimonials and case studies showing the benefits of what you do.

Some franchisees/franchisors were worried social media was a waste of their time, but Knight said it was definitely worth it if they were spending time on the right things. For every 10 things posted 60% should be about how what you do solves a particularly problem, 30% should be case studies and testimonials and the rest should include a clear sales message. He suggested using tracking codes to see what posts are generating the most traffic and being disciplined about time investment, for instance, setting aside half an hour a day to do social media. Social media management sites like Agorapulse could schedule posts and send them out to different platforms.

Financial issues

Other questions centred around financial issues. One question was about the difference between a monthly franchise fee or a one-off payment. Bal Kaur said franchisors often have to supply ongoing support and that needed to be budgeted for in the franchisee’s business plan. Amy Leite said the franchise agreement needed to set out the fees. The initial fee is for the ‘business in a box’ and is a one-off payment, but there was usually a royalty and management services fee which is either a set or minimum fee paid monthly or as a percentage of gross income. Bal Kaur said that initially most franchises use a services fee based on a percentage of turnover in recognition of the shared risk franchisor and franchisee are taking and the fact that it takes time to build the business.

Asked if it was better to get an overdraft or a loan for business development work, she said it depended at what stage the business was. For more established businesses who could make regular repayments an overdraft might be a good idea, but for newer businesses a loan might work better.

Bal Kaur was also asked about how to work out a reasonable cost for a franchise and advised listing all the costs, from training to time investment in a franchisee and ongoing support. All the costs had to be thought through.

Legal issues

Another questioner was worried about copyright – what was to stop potential franchisees going on training courses and stealing the business idea. Steph Gutmann said business ideas could be protected, but that the franchise was more than the business idea –  it was the franchisor’s experience, knowledge, market research and their model. She also advised franchisors to limit what information they gave out until franchisees had signed the franchise agreement. Amy Leite added that franchisees should have signed a franchise agreement before they were offered training and that the agreement should specify confidentiality, prevent replicating the model and restrict similar operations in a given territory for a period after the agreement has come to an end. Franchisors could draft a non-disclosure agreement for those potential franchisees who want more information but are not yet ready to sign up.

Marketing

Steph Gutmann was asked how to increase brand awareness. She suggested thinking broadly about the platforms target customers use and what interests them. She also suggesting using video material. Adam Knight added that Facebook allowed people to hone their target audience according to their location and interests. Different social media platforms were good for different things. Steph Gutmann advised not to forget face to face networking. Bal Kaur said local banks could also help to promote local businesses for free so it was worth getting in touch.

Advertising on Facebook and Google was not very expensive, particularly if the target audience was quite specific, said Adam Knight.

Going international

One questioner asked about exporting their franchise model. Bal Kaur said it was important to look at the local compliance in the country the franchise was being exported to and to consider any cost implications of sourcing relevant products. There may be a branch of a British bank in the country who could help.

>Amy Leite replied to a question about a franchisee moving abroad and setting up there. She said it was important to consider what model to use – whether a master licence to operate across the entire country, meaning the franchisee was effectively acting as the franchisor in that country, or an agreement that limited the franchisee to a certain area, similar to a normal franchisee arrangement in the UK. The franchisor also needed to investigate any legal or regulatory requirements in the country, depending on what the franchise business was, and the kind of support that could be offered. This and issues protecting the brand, addressing time differences and so on, all had to be laid out in the franchise agreement which would be based in English law, said Leite.

Maternity cover

Amy Leite was questioned about maternity cover. She said it was not generally offered, but was increasingly common in lifestyle-type franchises. If the franchise has enough franchisees a neighbouring one can help to cover maternity leave. Another option was for head office to cover administrative duties or for the franchisee to hire a manager. The franchise agreement would need to spell who would cover the costs of the latter and whether the person on maternity leave would take a part of the fees and if so, whether they would have to do some work to qualify for it. Everything needed to be spelt out clearly in the franchise agreement to avoid disputes at a later stage.

Women in franchising

Steph Gutmann said the number of women in franchising was increasing, but women were more likely to go into lifestyle type franchises rather than the big brands. Care franchises were becoming more popular as were management-based and accountancy franchises. Several women started in lifestyle franchises and had gone into management style businesses.

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