The attractions and challenges of franchising

Mark Abell is rated as the number-one franchise lawyer by the Chambers Guide to the Legal Profession, and has specialised on the subject for more than 20 years. He works alongside salon groups HOB salons and Mahogany and is the author of six leading books on franchising. Here he outlines both the benefits and pitfalls.Franchising can offer many commercial attractions and challenges to those in the hairdressing sector, but it pays to explore exactly what it means to be a franchisor in terms of money and management. Franchising presents companies with a unique business solution, allowing them to grow profits, increase turnover and establish their brand, both nationally and internationally, so they can achieve growth without taking on a huge amount of extra overhead and risk. Businesses that franchise have three main things in common: 1. A strong brand 2. A hunger for success 3. The desire to grow more than their finances or manpower allows. Franchisors can grow profits and increase turnover using other people’s capital, energy and enthusiasm in a way that benefits all those involved, so everyone can share in the profits. But is it realistic for your business? You need both energy and courage. In principle, there is no reason why franchising can’t lead to commercial success, but it’s not a guarantee. Be honest with yourself. Is it right for your business? Why are you thinking about it – is it to overcome problems? Is it part of a bigger vision or to increase geographical coverage or profits? Are you willing to commit your time, resources and energy to making it work? As a franchisor you are not offering the guarantee of success, but the blueprint for a business that is already successful. It’s certainly not an easy ride or a get-rich-quick scheme, but it can be a get-rich scheme. Once you have established the risk, responsibility and hard work involved, you need to establish a structure that works for both you and the franchisee. Every business is different and you need to consider all of the commercial, artistic and legal issues. Why should people get involved in your business? What is your artistic direction and how will you communicate that? If you have the wrong structure it could result in failure. There are some basic steps that must be in place:

• Ensure your brand is properly protected
• Develop a structure that works
• Ensure communication for you and the franchisee is clear
• Get documentation/paperwork sorted
• Always remember that the devil is in the detail.

Finding franchisees can be the most difficult step as they will be representing you. Don’t debase the currency of your success – be fussy, choose wisely and differentiate yourself to take your business to the next level. If you work on empowering others and harnessing their energy and enthusiasm it will result in a winning formula for you and your franchisees. Talk through plans with an expert before committing yourself – if done correctly it really can be the fast track to success.

Industry Experts' Views

Alan Stewart, director, Rainbow Room International

“We started franchising in 1996. We had three salons and were faced with the choice of providing opportunities for key staff to develop their careers or risk losing them. Because we have grown organically we have ensured we retain quality control of the brand and the many salon systems. All our franchisees have worked with us for a long time and believe in our systems, processes and philosophy. Choosing the wrong person is a huge pitfall; as the whole group risks falling like a pack of dominoes. We never suggest opening a franchise to any of our managers; it has to be their personal ambition. If it’s not a real goal then it won’t work. You also have to retain a strong element of control over the franchise to ensure the same high levels of service are consistently delivered across the group.”

Peter Dellicompagni, co-founder, Francesco Group

“We began franchising in 1983, driven by a demand from senior people within the salons for an additional step on the career ladder. Franchising has definitely been a great success for us – we have grown from seven company-owned salons to 30 franchised and one company-owned salon. We have always ensured we have the right leaders in place who are passionate about their role, and this leads to a flourishing salon and good business growth. Our success can also be attributed to the level of support that our franchisees receive – it’s not just a brand name they buy into, but a clear system for success. We support them at every level and in return we expect drive and commitment. Before any company opts for the franchising route, they must ensure it fits firmly into their business plan as a whole. If it does then it is a wonderful opportunity to achieve greater success.”

Toni Mascolo, chief executive, Toni & Guy

“In the late 1970s and early ‘80s we were running a great salon business in central London, but I’d noticed many of my staff were looking for career opportunities and I was ready to grow my business. Offering some of my top people the opportunity to own a Toni & Guy salon while still staying involved myself was the ideal solution. The first franchise businesses were in Brighton and shortly afterwards Guildford. We now have more than 400 around the globe. It’s given all the best Toni & Guy people an incentive to stay and the opportunity to develop, plus it’s instigated all the great things we now enjoy – education, branding, PR, our academies, pictures, products, magazine and TV. Always consider that threats to your business will change. My advice is to be continually alert, flexible and aware and remember ‘if you don’t change, you die!’”

Stephen Kee, managing director, Saks

“Saks was founded in 1974 and began franchising in 1981. It enabled the company to grow rapidly and it now has more than 120 salons nationwide, and in Belgium. The group has honed all aspects of the business to offer the best support to its franchisees and its clients. Franchisees are generally more motivated and committed to the success of the individual businesses than employed managers, having invested their own capital in the business. Saks’ franchising has worked because there are measurable standards, policies and procedures for everything, from salon design and cutting and colouring methods, to how many times the phone rings before it is answered. You need to invest in developing and marketing the franchise, so certainly in the short term, don’t expect huge profits as you’ll be reinvesting back into the business. You need to make sure you get the right franchisees and control what they do. A bad franchisee can damage your reputation, affecting all your franchisees and your overall brand.”