Many venture capitalists, business angels and new entrepreneurs will understandably, be looking at the current economic climate with grim dismay.

Indeed their misgivings with regard to the investments they have made may be causing considerable alarm. Lack of action or indecision can often only worsen the situation, but the good news is that all is far from lost.

Indeed the current economic climate is likely to indicate the need to restructure their business. one way to do this is to utilise franchising as the route to market. by devoting direct and local operations and sales costs these can often reduce or even eliminate a large element of fixed costs. Even more important, by bringing in people who have a vested interest in being successful, can lead to an increase in market penetration.

Franchisees, by virtue of the fact that they invest in acquiring a territory or a fixed location are often referred to as 2nd generation entrepreneurs. With redundancies increasing daily, more and more people will be looking for new opportunities. Indeed, it is this very fact could not only hearten venture capitalists, business angels and new entrepreneurs, but also offer them an answer to their concerns about the long term future of their business. In some cases it could well be 2nd generation entrepreneurs to the rescue!

This article first appeared in The Times 21st April 2009

There are very many variations in franchise structures, for example, job franchises, solus franchises, management franchises, fractional franchises, area developer, regional developer, regional and master franchises. Even within these types there are variations depending on particular circumstances.

Some levy a management service fee that can range from 5-30% others operate solely on product mark up, some have a combination of both, some give exclusive territories and others don’t. Within their network some franchisors have more than one structure.

How the franchise is structured us crucial to the success of the proposed network. Many factors will need to be taken into consideration including company culture, management style and the aspirations of the franchisor, bearing in mind these factors are likely to change by design or otherwise.

Other questions that need to be addressed are how to maximise the appeal of the franchise, how to recruit franchisees of the right calibre and should you convert existing employees or not. Bear in mind that changes may have to be made in the existing business both in systems and human resources.

So, having read the books and attended the seminars you may be tempted to set up the franchise yourself, but unless you want to emulate your competitors’ mistakes (and you won’t discover them from a glossy brochure or exhibition stand) you should first obtain some professional help.

Your first port of call should be to a British Franchise Association accredited franchise consultant, who can offer a complete range of services from a feasibility study through to a full blown business plan. Services provided should also include operations and training manuals, reporting systems, organisational structures, writing the text for your recruitment brochure, presentations to your bankers (if raising capital) and writing a brief for the franchise lawyer.

If required, the consultant should also be capable of structuring the franchise for future expansion into European/Overseas markets. All services provided should be carried out by the consultant and not passed to intermediaries.

The franchise consultant should have a proven track record, be capable of designing and providing practical help to implement a franchise structure specifically for your business taking into account the resources you have available.

Above all, ensure that the consultants have actually run a successful franchised business in a high level capacity as theory is fine but the reality is very often different.

This article first appeared in The Sunday Times 19th April 2009