For a brand not attracted by the possibility of third party investment, franchising offers a route to expansion which can result in rapid growth.
The starting point is for the brand to determine what exactly will be franchised and where.
Where the brand has its own UK stores it can be expected that the look and feel of these stores will be replicated throughout the franchise estate – both UK and overseas. But, the brand should not stop there. For example:
Essentially, the intention is to develop and maintain brand integrity.
How is this to be done? The two key components are a robust franchise agreement and a franchise manual that set out the requirements for franchisees.
The franchise agreement will need to address whether the franchisee is being granted:
with appropriate provisions addressing:
Further financial issues will affect the main purchases to be made each season by the franchisee and what is to happen in respect of unsold stock. A franchisee that is able to offload such stock on to third parties who may then sell in the UK will harm the brand.
Franchising does have a cost. The brand owner will benefit from extra wholesale sales and growth in brand recognition. It may also mean forgoing the opportunity to establish its own retail premises in the relevant country until the franchise ends.
Day to day costs will also result from ensuring that the franchised operations are working properly. Franchising is most definitely not a set up and forget operation.
Easy in but not so easy out? To avoid being a lobster in a pot, it’s important to ensure that the franchise agreement also addresses the brand’s exit requirements.
But done well, franchising will rapidly grow the bottom line – not least as third parties looking at acquiring the brand or investing in a floatation will take a view as to the possibility of replacing the franchised estate with the brands own stores as Anya Hindmarch is on the brink of doing in Japan.
Everyone’s a winner.
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