Creating a franchise (4/5): laying the foundations for development

Een franchise creëren: de basis leggen voor ontwikkeling

Business plan, pilot unit(s) and operations manual: these three elements are fundamental to laying the foundations for future development.

Four experts tell you why to set them up and how to use them. In addition, four franchise networks share the implementation of a crucial element in their launch.

Modeling franchisor development

The first step in developing a franchise is to gather a number of concrete, precise prerequisites. Such as the test unit, brand protection, the establishment of competencies or the network rules that will prepare the future contract.

“You also need to define the scope of the development you are planning in successive time spheres, based on specific geographical and economic ambitions, and thus draw up your business plan.

It should model the franchisor’s development over 5 to 10 years, and that of franchisees over their first 3 years, with sales gradually increasing. It must also determine which services to implement to achieve this ramp-up, and above all in which order.

If achieving a certain level of profitability requires a large number of points of sale, the new franchisor must be aware that the revenues generated by the network will, in the first few years, be much lower than the costs associated with the initial investment.

The first challenge for the new franchisor is to find the time to work on the franchise network project. We need to be able to focus on the new skills we need to acquire: network development and management. Very often, projects don’t come to fruition for lack of this basic management.

If these budding franchisors are so caught up in the operational side of things, it’s because they haven’t put in place the tools, machinery and delegations needed to duplicate their concept. You need to free up your time,” says Laurent Poisson, head of Cabinet Participe Futur and a trainer at the Académie de la Franchise.

Two professions for the future franchisor

The future franchisor will have to constantly evolve his concept. To do this, it will test innovations in its pilot units and pass them on to franchised outlets.

“Hence the need to create conditions of trust with new entrants , so as to regularly implement new features. This operationally integrated upgrade must be included in the franchise contract.

A franchisor has two jobs. The original one, on which its concept and know-how are based, and which it masters through its stores. The second is that of network head. He must move from “doing” to “doing” in order to develop and animate his network.

Eventually, the franchisor will organize franchisee commissions to consider changes to the concept. “says Emmanuelle Vaillant, Associate Consultant at Franchise Management.

Pilot units: making the concept credible

To develop your concept as a franchise, you need one or more pilot units to demonstrate the effectiveness and duplication of the franchise system.

“Clearly, demonstrating that by mobilizing the same resources in a different catchment area, similar results can be obtained, without this being linked to the charisma of the franchisor, but rather to factual elements that demonstrate a substantial competitive advantage,” explains Laurent Poisson.

“The pilot is not legally compulsory: no legal text stipulates it, only the European franchising code of ethics. The pilot gives credibility to the concept: we don’t franchise losses. There must always be material proof that the concept is economically viable.

After that, the pilot had to cope with a number of setbacks: insufficiently durable equipment, supplier shortages… The concept improved over time. Better still, when a situation eludes a franchised outlet, the pilot may already have experienced it and have a solution to the problem. It remains a Research & Development laboratory, a permanent training center and the franchisor’s technological showcase for trying out new recipes.

Sometimes, the future franchisor has to adapt his pilot to the franchise model, for example to extend it from Paris to Limoges in a more concentrated format, in line with the size of the catchment area.

The concept must evolve regularly to maintain the network’s growth, generate ongoing innovation and justify the level of royalties,” adds Laurent Delafontaine, CEO and co-founder of Axe Réseaux, a member of the Fédération Française de la Franchise’s College of Experts.

Preparing to pass on know-how

For all franchise brands, the operating manual (or Bible) contains all the elements that make up the franchisor’s know-how. It meets a legal obligation, in the same way as the Pre-contractual Information Document and the franchise agreement.

“The operational manual is primarily intended for network management. It enables us to organize and plan the initial training of franchisees, and promotes uniformity of practices in sales outlets. It needs to be updated regularly, ideally every year. It should also be made digital, with a platform ensuring traceability of the parts read by each franchisee”, assures Emmanuelle Vaillant.

The operational manual is an essential element to formalize, as it needs to describe all the actions to be carried out in order to duplicate success. They are set out in a 500-600 page book, now enhanced by videos and other digital media.

“It has to dissect the whole operational implementation, without being afraid to go into all the details. It can take a few months to produce a tool that’s exhaustive, easy to use, scalable and easy to transmit, while preserving confidentiality”, notes Laurent Poisson.

“To prepare for the transmission of know-how, we first assess the franchisor’s ability to write in detail for a franchisee who, at least once out of two, does not come from the business sector, and has paid to obtain a complete method,” adds Jean Louvel, Progressium partner and expert in the creation and structuring of franchise networks.

To sum up, the operational manual should be read like an easy-to-read instruction manual, and be digestible, readable, dynamic and digital.

“Above all, it must be animated by practical cases; a good video is better than lines of writing. As soon as our structure receives a technical question, it asks whether the franchisee has consulted the operational manual on the same subject”, concludes Sébastien Vernay, Associate General Manager of the Préservation du Patrimoine Energie network.

Anticipating the future to ensure the network’s continued existence

The development of the network must be anticipated, both in terms of the management of the franchisor-manager, and in terms of the manufacture of products on a larger scale, as was the case for the Louis Herboristerie network.

“Franchising is a new profession. It calls for humility, the ability to listen and to constantly challenge oneself. For the past two years, I’ve been able to devote 80% of my time to developing the franchise network, having organized myself to delegate my tasks. We want to offer a successful store concept through our pilot unit”, says Louis Gobron, founder and director of the Louis Herboristerie network.

Franchising: experiment and learn

The same approach was adopted by another product franchisor, La Fabrique Cookies.

“Thanks to the sales and profitability of our proprietary network, we have the means to finance our expansion. In the worst case, it will be a great experience for experimenting and learning. In the best case, it’s building a network with efficient, friendly business leaders.

We’ll be able to rely on our new laboratory in the Paris suburbs, which we’ve been planning for a long time, and which will increase our production area from 350 m2 to 1,600 m2″, explains Alexis de Galembert, founder and CEO of La Fabrique Cookies.

Three keys to franchising

Finally, becoming a franchisor requires careful thought. So explains Sébastien Vernay, Associate General Manager of the Préservation du Patrimoine Energie network (Athome Group). “You have to analyze the relevance and sustainability of the market, to make the franchisee want to make a long-term investment in the concept. The end customer must be the priority for both franchisor and franchisee.

The franchisor’s duty is to promote the brand in the media, to develop the network’s reputation and bring new customers to franchisees. Secondly, the franchisor must be competent and expert in his or her field. It must bring quantifiable added value to the franchisee, enabling him to achieve productivity gains and economies of scale.

Last but not least, it’s crucial to test in pilot units whether an innovation will work with franchisees. Our fifteen or so branches are veritable laboratories, for experimenting with communication media or products.

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