Franchising in Fashion Industry: When to Start? 1

Every entrepreneur always asks the question: "What's next? How do I see development of my business?" And entrepreneur in fashion industry is not an exception.

The possibility of rapid expansion with little investments seems very attractive at first thought.

What are the obvious advantages of franchising?

  • The possibility of rapid expansion of the company;
  • Investing in discovery and launch of new retail spaces through partners;
  • Guaranteed sales of products / services;
  • Possibility to get additional profit through selling related services;

Talking about the disadvantages, we could identify only two ones:

  • Possible dishonesty of partners and, as a consequence, image and reputation risks for the company;
  • Investments in preparing the company for the launch of franchise: it is necessary to develop not only the concept, but also a list of supporting documentation and space to serve the partners;

Sounds pretty lucrative, does not it? But how can you determine the readiness of your company to business expansion?

There are a few markers:

  1. Own operating business cliché: to expand a network of clothing stores company must have minimum two own stores operating at least a year. Otherwise, it will be impossible to share the experience with a new partner, not to mention the fact that you’ll have to introduce a fabricated business system as a successful example.
  2. Transparency of the company and business processes: partners will need to know your clear and detailed work structure to reproduce it successfully, and for that purpose all processes within the company should be described accurately before new franchise enters the market.
  3. Understanding and selection the things, which will be transferred through the franchising system: brand concept, product, software, technology, etc...

Welllet’s assume all these points are fulfilled, what's next?

Next, you’ll need to prepare documents for partners, so-called "franchise package"to make your offer attractive and understandable.

What does it consist of?

  1. Presentation for B2B partners, made to meet the requirements of potential target business audience. It must contain the following information:
  • Requirements for the future partner
  • Requirements for premises
  • The exact amount of investments to start the business
  • Royalty, lump-sum and membership fees
  • Service and support of the company to the partner
  1. Example of calculating a standard business plan with clear payback period, profitability and exact amount of the necessary investments for the project.
  2. "The Big Book of the Franchisee." It contains all the necessary information for partner, answers to all questions that may arise during the start of the project and future activity. It contains the following sections:
  • Section with information about the brand, the core product and additional services;
  • Section with detailed instruction on construction and planning of retail space, information about suppliers and contractors;
  • Rules of retail and customer service;
  • Recommendations for marketing activity and strategy with examples and estimated budget;
  • Description of monitoring and reporting system;
  • Requirements for recruitment;
  • Checklists, regulations, instructions: from "acceptance of a new store" to "mystery shopper";
  • Information about paid and unpaid services, which the company-franchisor provides to its partners;
  • List of contact persons in the company and answers to frequently asked questions;
  1. Franchise/sub-license agreement. You will also need a services agreement and a contract of transfer the trademark use right. Franchise agreement should contain information on payment for the right to use the business model, royalties or lump-sum payments.

So, we have created an excellent operating franchise model. Now, the most important thing is to ensure that your franchisees make profit along with you: monitor their sales and margins, test their staff, help them with negotiations, give them accounting and legal advices, and do everything to make their and your business more successful!

SMC Fashion