Many businesses have heard of franchising and this has led to many myths about what franchising is and how to go about it. Listed below are the five most common myths about franchising a business that I come across.

Myth 1: It is a cheap option as the franchisees use their own money
It is true that franchising a business requires a lot less financial and operational resources than establishing a network of company-owned outlets. However, it does still require a sizeable financial investment. Typically, businesses looking to franchise will have to budget to spend in the region of £20,000 to set up their franchise and at least the same on advertising the franchise opportunity, and this is all before they even start to see any financial return through the initial licence fees and the ongoing management fees.

Myth 2: It is an easy option because the franchisee does all the work
Most businesses fail to appreciate the level of support required to have a successful franchise network. Franchisees do own their business and are ultimately responsible for the success or failure of that business. However, prospective franchisors should not underestimate the workload required to support their franchisees. The majority of franchisors charge an ongoing management/royalty fee. The franchisee will rightly expect, in return for this fee, the support and guidance of the franchisor to ensure that their opportunities are maximised and their issues are addressed. It is essential that the franchisor provides proper and adequate support to ensure the success of their franchisees.

Myth 3: You have to run a pilot franchise first
The European Code of Ethics adopted by the British Franchise Association states that businesses looking to franchise should have been successful for a reasonable time and have piloted their business in a separate region before considering starting to franchise. Sometimes a business can point to other companies within its sector which have been successful nationwide and therefore so long as the parent company is successful then there may be no need to set up a standalone pilot. Additionally there may be strategic reasons why speed in rolling out the franchise makes setting up a pilot franchise operation disadvantageous, such as maintaining first-mover advantage. It is important to be open with prospective franchisees and explain the reasons for not having run a pilot franchise and that the risk to them is greater than for a business that has operated in more than one area.

Myth 4: Franchising is very popular so attracting franchisees is relatively easy
The biggest mistake businesses make when franchising is in under-spending on their franchisee recruitment. It is not a case of ‘I'm sure I can find some money for advertising'; it is an absolute must. Franchising as a way to owning and running a business is very popular but there are over 750 recognised franchises in the UK to choose from and probably the same number of unrecognised franchises. The result of this is that new franchises have a lot of competition in attracting franchisees.

Myth 5: Franchising is an option to generate income for a struggling business
Often businesses hope that the income from the initial franchise licence fee and, to a lesser part, the ongoing management fee will provide the necessary income to prop up a struggling or failing business. Franchising is about replicating a successful business model and people paying for that privilege. A struggling business will lead to struggling franchisees. If a business is failing, then it must be sorted out before considering franchising.

These five myths are of course not the only things that businesses contemplating franchising need to be aware of. It is important that businesses considering franchising get professional advice as there is no thing as a standard franchise. No two businesses are identical so it would be wrong to expect any two franchises to be same.

For further practical information about whether franchising is right for your business contact Clive Sawyer on 01420 540260, email him on clive.sawyer@businessoptions.biz or visit www.businessoptions.biz

There are a number of key elements to which you need to pay close attention if you are to be a successful franchisor.

Find out who is competing with you for franchisees. This means doing market research to see who is franchising not only a business which is similar to yours, but also what other franchises are available for sale in the same price bracket. Not all prospective franchises are wedded to the idea of only providing ‘your’ goods or services. Many are concerned with starting their own business and approach franchising with an open mind, but with a good idea of what they can afford. They will therefore be looking at franchises within their price range.

Have established criteria for franchisee selection. Do not relax them in a moment of weakness. Resist the temptation to lower standards when recruiting the first few franchisees or if the growth in your network is not keeping pace with your expectations.

Do not forget that your franchisees are your customers and that your obligations as franchisor to your franchisees are a good deal more different from those to your customers. Remember also that indirectly the customers of your franchisees are your customers too.

The management of a franchise network is an art, not a science. The big challenge your staff (who will be employed) will face is managing franchisees who are not your employees, but independent business people who are the owners of their businesses. Managing them as managers of a branch business will not bring the best out of your franchisees and will lead to confrontation. So improve your management skills and those of your staff.

Do not fail to deliver what you promise. Take your obligations as a franchisor to support your franchisees seriously. To avoid being accused of failing to keep your promises, always under-promise and over-deliver. In this way you will gain a reputation for doing what you promise and, more often than not, more than you promise.

You must be able to justify any minimum performance targets you impose and the basis upon which they are calculated. Make sure that they are reasonably achievable and be prepared to impose such sanctions as you may have reserved if they are not achieved, otherwise you will lose credibility and have problems in enforcing targets when others fail to achieve them.

The key to your success and that of your franchisees is uniformity of business practices, uniformity of marketing image and uniformity of the manner in which products and services are delivered to customers. Do not tolerate sub-standard franchisees: they affect your reputation and that of your franchisees too.

Demanding franchisees are not necessarily bad franchisees. Often the most demanding franchisees are also the best in your network. This may be a coincidence or it may be that it is precisely because they are demanding that they are good. Better to have a very demanding franchisee who is firing on all cylinders and growing his or her business than to have a quiet, compliant franchisee who merely chugs along.

Finally, ask yourself what are you doing now that will make your franchisees want to renew their franchise agreements when they expire. Franchising is a long-term proposition and franchisors who do not look to the future will find that their franchise network will diminish in the longer term.

For more information please email Manzoor Ishani at mgi@sherrards.com or visit www.sherrards.com

Robert Looker, franchise development manager, CREATE project
There are many definitions of franchising, but in essence it is the granting of a company's rights to a third party to operate their business system using a common brand and common format for promoting, managing and administering the business.

If you decide that franchising or licensing could be a route to grow your business you need to consider the following issues:

• Your business format should be fairly simple, proven and capable of replication and have been trading successfully for at least 12 months

• The business must be financially secure and allow for the financial resources to build and support a franchise network

• There must be sufficient profit to provide a worthwhile income for both parties

• You need to be certain that there is a steady or growing demand for your product or service in the long-term

• All the necessary resources such as staff, premises, infrastructure and finances should be in place to build the network, train and provide ongoing support to franchisees

These are just some of the considerations. The next step is to find out more about franchising by attending one of the franchise or business StartUp shows. These are held each year throughout the UK and bring together franchisors, the BFA, banks, consultants, solicitors and the franchise publications. Introductory seminars are held during the exhibitions and franchising seminars are also run throughout the year by CREATE and its partner, the BFA.

Research the internet to gain as much information on other franchise businesses as possible. The CREATE website offers impartial advice through various online services such as the franchise suitability matrix and the business growth model. They will help you to further assess your company's suitability for franchising.

Most importantly the decision to franchise your business must not be taken lightly and you should seek expert and professional advice from recognised consultants, solicitors and accountants and in particular other franchisors before investing any money. A robust business plan is vital; it needs to address the issues of your expansion plan and how it will affect the business and all processes need to be well documented. Projections need to be drawn up ensuring your growth rates are not overestimated.

The next significant and critical step is to set up one or more pilot operations which will:

• Identify any problems and development needs
• Enable you to put an operations manual together
• Highlight the set up and operational costs involved

Preparation of a prospectus or marketing plan is essential to attract suitable franchisees and must give clear, concise and accurate information about your business to promote a strong company image. Recruiting the right people is critical: don't be tempted to lower your standards or this could lead to problems in the longer-term. Popular recruitment methods include attending franchise exhibitions, advertising in national and regional press, specialist franchise magazines and industry sector press.

To find out more about CREATE's prospective franchisee and franchisor workshops, held both regionally and nationally throughout the year, please email create@exemplas.com or visit www.createproject.org.uk

In 1998 I started at Fastway Couriers in Hawke‘s Bay, New Zealand. It was an interesting first few weeks as Bill McGowan is New Zealand‘s own 'Sir Alan Sugar‘ and the company has a very no-nonsense approach to both the courier and franchise industries. Fastway is now the world's largest courier franchise network.

After a very step learning curve for two years, I took the opportunity to move with the company to Australia where I was a national field manager based initially in Darwin, Warrnambool, and finally at the national office in Sydney.

My brother‘s involvement as a boxer at the Commonwealth Games in 2002 brought me to Manchester. Fastway, having proved to be successful franchising business model, was moving into Europe and I became the northern area manager for the UK.

There can come a time when an employee begins to wonder about helping to make the owners money and I made the decision and purchased the Fastway Couriers (Greater Manchester) franchise in mid-2006.

This means that I am both a franchisee (of Fastway Couriers England) and a franchisor (of the individual courier franchisees operating the vans). My franchise runs the depot, sales team, administration and linehaul (trucking system). The courier franchisees work with their sales reps to bring on repeat business customers, for whom they pick up and deliver parcels in their exclusive Geater Manchester territories or link into the local and national net work for parcels going out side their area.

Fastway offers cost-effective delivery service for parcels up to 25kg with a high level of service. Local parcels move same day across Greater Manchester for only £2.95 while national parcels move for £4.95 next day.

The couriers sell bar-coded stamps to the customers at a margin, having brought them wholesale from myself. Fastway has effectively invented a sophisticated postcode stamp which the customer purchases upfront, allowing a very good service at a competitive price.

It is a big change moving from being an employee to a business owner. This is the most fundamentally important transition a person must make to become a successful franchisee. You should not simply be buying a job.

A good franchisee will realise that they can not look to a 'boss‘ to take responsibility for their success. You have to up your commitment and become passionate about the business. I have found that my job satisfaction has soared.

A good franchisee must work hard to apply the franchisee system. If you are a maverick, entrepreneurial type such as Richard Branson, consider whether a franchise is really for you. If you spend your energy trying to reinvent the system maybe you should be in a start-up business. Franchising is about using your energy and entrepreneurial skills to apply the system.

I am also a franchisor and this requires some core disciplines. Recruit wisely. The short-term gain from recruiting franchisees who are really buying a job will cause pain when they fail to grow their businesses.

I have to work with my franchisees to ensure that the transition from employee to business owner is rapid and complete. A good franchisor will use his or her skill and knowledge to help their franchisees develop as business people.

Finally, a franchisor must not waver in enforcing the franchise system. There will be gripes and suggestions about the system from franchisees but to cave into these only leads to having no system at all.

Fundamentally, a good franchisee and franchisor should both recognise that they are business people working with in the parameters of a tried and trusted system. They are neither employees nor completely independent entities.

For more information see www.fastwaycouriers.co.uk