The article ‘Five strategic steps of franchising’ by Yevgenija Voznyuk, Consultant, Manager of the HR services Group EBS, was published in the “BUSINESS” newspaper (April 10, 2006)
A joint project of dry-cleaner’s network “Un momento” and consulting company EBS “Strategic development of dry-cleaner’s network “Un momento” started in 2004, when “Un momento” already possessed a good developed dry-cleaner’s network consisting of 6 shops and 28 receiving centers. EBS company was invited to design the company’s development strategy in cooperation with its management and prepare a franchising package for it. To our mind, the whole project can be divided into 5 stages.Step 1. Strategic stage
The company’s top-management and owners should understand that the process of franchising package designing and development of this trend in the company is an expensive service. As generally leaders and high management take part in the preparation of franchising activity, the cost paid for their working hours spent on this work can run into thousands of dollars (depending on the period of their work and the amount of involved managers). Moreover, for the franchising trend development external consultants, an external lawyer experienced in drawing up franchising contracts should be involved in this work. It can be necessary to patent a logotype or a technology. All these factors lead to extra expenses.
On the other hand, if the company starts franchising activity, it will be very difficult to come out of it for such a change of a strategic trend can lead to loss of the company’s image and applying sanctions for breaking franchising contracts’ conditions.
That’s why, the first stage of franchising can be easily called the stage of strategic planning. Practice shows that the decision concerning franchising prospects should be made by top-management of the company with full owner’s approval. This variant is considered to be the best, for franchising activity concerns each department of the company and needs great financial resources, manpower etc. Hence, the project of the strategic development of dry-cleaner’s network “Un momemto” began with the seminar for the company’s mission, sights, principles, goals and strategies designing and co-ordination.
Moreover, personnel’s interviewing and questionnaire were held to define the company’s weak and strong points, describe the process of strategic planning, analyze organizational and juridical structure, personnel motivation, business-processes and assess risks. The decision on the company’s expansion through development of regional franchising networks was made at the seminar concerning strategic development. The owners and top-management of “Un momento” were present at the seminar.
Step 2. Preparatory stage
After top-management had made a decision to launch franchising activity, it was necessary to make sure that there were all conditions required for a work with a franchiser, namely a good brand, technologies, skills and methods that had to be given to a franchiser.
The first thing franchisers pay attention to is a company’s name that has some good reputation at the market and is popular among consumers. It is naturally that technologies and skills used for services providing or goods producing should be of great importance. Imagine the situation that you are going to apply to a dry-cleaner’s for the first time in your life. Which one will you chose? That’s right ― the one you have already heard about or you have been recommended by your friends or acquaintances. It is unlikely that you will come to a receiving center and ask about technologies of clothes cleaning to receive quality assurance. Therefore, a brand helps to attract a consumer, and technologies and high-quality service help to hold a consumer.
By the beginning of the project implementation, “Un momento” had already had a positive, developed brand, approved technologies and systematized production processes that could be given to a franchiser.
Step 3. Inner changes
If a company has decided to start franchising activity, it will surely have to reorganize its organization structure and documents circulation for a new department (or a new position) responsible for franchiser’s work should appear in the company. Usually among this department’s responsibilities are search for franchisers and signing contract with them, control of their following the conditions of a contract (for example, observance of quality standards, image etc.), monitoring of timely royalty payment (regular fee paid by franchisers for the right to use the name, a franchising package etc.).
Thus, a new position was created in the company “Un momento” ― a franchising manager, which was subordinate to a business development manager. Main duties of a franchising manager included scrupulous preparation of a franchising package, juridical maintenance of franchise selling, organization of presentation of franchise conditions for potential clients etc. With the beginning of franchising activity, there appeared a necessity to change function responsibilities of all the workers that would cooperate with a company-franchiser in some way. For example, a financial director took up the duties of working out and implementation of the most expedient forms of payments with companies-franchisers, their financial reports control etc.
Step 4. Development of a franchising packageb
At this stage much depends not on external consultants but on the company workers involved in this package development. These are the workers who describe technological and production processes, observance of which guarantee provided services quality. In theory, the company can prepare a franchising package without involving external consultant, but in this case consultants play an important role of a coordinative center that activates all necessary resources for development of a franchising package.
During the project’s implementation EBS consultants were responsible for filling a franchising package (in other words, for the documents that had to be included to the package), compiling documents not concerning technological and production processes (for example, production organizational structure, official instructions for dry-cleaner’s workers, motivation scheme and business processes), control of the quality of technological and production processes documentation, and also for making a single franchising package out of all necessary documents.
In most cases filling a franchising package will differ depending on a field where companies-franchisers work.
Step 5. Client’s actions in return
One more piece of advice should be giving concerning control of franchising activity development process by a company-client. In case of external consultants’ involving a franchiser should appoint ‘an owner’ of this process, in other words, a person that will be responsible for performing all kinds of work in time, work distribution and coordination among workers involved in the process of development of a franchising package, and achieving of all the goals set. The name of such a coordinator is put to the project’s charter signed at the initial stage of the project and where his duties responsibilities are described. For example, in the company “Un momento” a project’s coordinator is responsible for the project’s organizational maintenance, the project’s participants’ cooperation with other departments, participation in organization of an interview with personnel, and also for seminar preparation and conducting. Moreover, before the beginning of the project it was adjusted with the company’s management that a coordinator would spend not less 30% of his working time on the work in the project and its goals would be of the biggest importance for him.
In case of absence of such ‘an owner’ of the process of franchising activity development, some cases of irresponsibility occur. Then work on franchising package development pauses or is delayed by workers of the company; the quality of the work performed by these workers falls.
Of no small importance is the fact that the position of a coordinator should be taken by a worker who is a leader and has authority in the company.
A dossier of the magazine “Business”
“Un momento” provides delivery of equipment for dry-cleaner’s and laundries in 18 cities of Ukraine, works on a franchising contract in 4 cities of Ukraine, namely in Donetzk, Kharkiv, Yalta, and Dniprodzerzhynsk.
In these cities “Un momento” is presented as a network, for example, a network in Donetzk consists of a shop an 12 receiving centers, in Kharkiv ― of a shop and 7 receiving centers, in Yalta ― of a shop and 5 receiving centers.
The franchising package of dry-cleaner’s “Un momento”
“Un momento” provides its partner with a full franchiser package:
1. Operation manual (assortment, recommended prize policy, service quality standard, working schedule standard, kinds of main expenses).
2. Documents package on opening production buildings and receiving centers (standards of opening production buildings and receiving centers, description of a receiving center’s design, description of kinds of equipment).
3. Documents package on training (training conditions)
4. Documents package on advancement (description of the conditions for corporative advertising usage).
5. Package of accompanying documentation (warranty and afterwarranty service for equipment; financial report; organizational structures of production units; official instructions, system of personnel motivation; business processes; documentation concerning a brand).
The package’s selling is conducted on conditions of entrance fee (7,000 Euro), and also on conditions of royalty, or advertising charges (the amount of which is included to royalty), payments of which are made periodically.
Royalty amount is contracted and depends on the region. During the first year royalty can be not paid, and further its sum varies between 100 and 1,000 Euro a month.
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