Competition is vast in the aesthetics industry and it doesn't show any signs of slowing down. Technology and treatments are constantly evolving at such a speed that it is difficult to keep up and predict future directions. If you have always dreamed of owning your own clinical business, or are considering venturing out on your own, there is a lot to consider: location, treatments, equipment, pricing, staffing, the training of these staff, marketing, how to get clients, competition, regulations, stock … the list is endless.
Then there's the risk and worry involved with setting up a business, especially if it is your first time. Will it be a success? Is this the right time? When will I see a return on my investment? Will I see a return on my investment at all? All this fear and the unanswered questions could be enough to put someone off, quite understandably. However, what if you could invest in a clinical business that is already established? One that already has status and a business model that is tried and tested, where you can utilise their success while building your own. Sounds too good to be true? Well it isn't, lots of aesthetic businesses are franchising as a way to expand and build their own brand while reducing their own set of risks and worries. In theory, this kind of partnership means success all round; however, there are advantages and disadvantages to be considered by both parties.
Opportunity as the franchisee
Becoming a franchisee is like entering a business on the first floor. A strong foundation has already been laid in the form of an established reputation and business model, which give you a head start and a great opportunity to continue building for yourself. Generally there will be some form of contract or franchise agreement drawn up dictating the requirements of both sides to make the partnership work and entitling you to use the brand and business model.
» Becoming a franchisee is like entering a business on the first floor. A strong foundation has already been laid in the form of an established reputation and business model «
Worries about whether or not the business will work should not be a factor, providing you follow the business plan and uphold your side of the agreement. You should be given regular support by the company in all aspects of running the business, so that you never feel alone if you or the clinic begin to struggle. It is generally your responsibility to recruit staff, meaning you can choose the people you have around you, their salaries, incentives and hours of work, as well as the HR side of things and how you manage your employees. You will essentially have the decision making power, but with the added confidence that comes with the support of proficient business consultants helping you every step of the way.
Liability as the franchisee
All the above is well and good, but there is still a cost involved in all this ongoing support—a cost that you continue to pay well after you are established and confident in your business. A franchise fee to use the business model, along with leasing of equipment and technical support, generates a list of costs that you will continue paying for a lot longer than you would if you were independently ran.
Furthermore, the support provided can sometimes feel controlling, because, with some decisions made by the franchisor (set out in your agreement), you will sometimes find yourself having little power to refute. The brand will want all of its locations to demonstrate a uniform operation, so things like promotional activity, monthly offers and price changes will need to be in line with the rest of the franchise. Even if you disagree with these changes or do not like promotional campaigns or materials, it can be difficult to make your own adjustments, which leaves little room for exercising your own creativity in the business. It is important to remember that it will always be someone else's business model; you are just the one executing it for them, and, even if you are not performing as well as you would like, you will still need to pay for the privilege to use it. Depending on the terms of your agreement, it may also be quite complicated and expensive to get out of the franchise, so thorough consideration is required.
Advantages for the franchisor
For the franchisor, the benefits are clear. They are essentially getting paid while their brand expands, reducing the financial risks to themselves if their business is self-financed. By franchising your brand, you will attract entrepreneurs who will be just as devoted as you in making the business work because they are (and have) invested. Naturally, you will get a say in the bones of the business, but the minor operational headaches, such as staff turnover, client complaints and stock levels, are not your problem. You can support and advise how best to handle such issues as and when they arise, but any costs associated or effects on the business come to the franchisee. All the while, you still get paid.
All investment that you would have had to spend to help set up the site, you will get back quicker than if it was your own business in the form of monthly or quarterly payments from the franchisee. You will have ultimate control of who the franchisee is and where the clinic will be located, meaning that your brand can go from strength to strength.
Disadvantages for the franchisor
Once everything is signed over to the franchisee, you can only advise them on how to handle certain aspects or situations when they occur; other than that, it is down to the franchisee whether they listen and act as advised. One example of this is the issue of client complaints. If the franchisee does not resolve any complaints appropriately and in good time, the negative backlash could affect the brand as a whole. The same can be said for the client journey and experience in the clinic—it is down to the franchisee to determine the experience their patients have, as they are in control of what goes on inside the clinic on a day-to-day basis. You can share success stories of what works well in other sites or what you would recommend, but it is ultimately up to the franchisee to decide whether or not they want to take this on board and make a change.
The franchisor cannot recruit for the franchisee; staffing decisions are down to the franchisee alone. This means that they may decide to employ people who you yourself would not choose to represent your brand. If you are trying to grow your treatment portfolio by introducing new treatments, the franchisees do not have to buy into them, which can be frustrating if you want all businesses to display all of the same treatments in order to establish your brand as a leader in a certain treatment area.
It is up to the franchisor to provide the franchisee with any monthly promotions in order to ensure continuity and transparency across the brand. However, in reality, there is little to stop the franchisee from going off script, giving discounts and recommending the prices they want, which could ultimately cheapen your brand. Again, you can advise them not to do this, but there are few ways in which this behaviour can be monitored and controlled without souring the business relationship.
Another issue that requires consideration is how payments from the franchisee to the franchisor will be made. What steps can you take to ensure that late payments do not occur and debt does not arise? If there are late payments, will you pull support from the franchisee? There is a lot to consider, and, as advised earlier, it is a complicated agreement to get out of, should you need to do so.
Devising your model franchise
In writing this article, I have drawn on my own experience of working for a partly franchised business, which ultimately ended up folding, to put together some advantages and disadvantages of franchises in general. By the time I was employed, the franchisee–franchisor partnership was near irreparable. There were too many unregulated offers and promotions that were authorised by the franchisees in order to get money through the till, and poor clinical decisions were made that ended up being partly to blame for the brand's demise.
The franchisees had little trust in the brand due to being let down before, and so many of them did what they thought was best for their clinics, while the franchisors struggled to collect debt and change the brand's appearance for the better. On the surface, franchising looks great for both sides involved, but there are several challenges for both sides to overcome in order for things to run amicably and smoothly. However, if these issues are addressed and resolved in the first instance, major complications can be avoided. It may be useful to consider the following tips before committing to any partnership.
Franchisee and franchisor selection
As there is so much to be mindful of in this industry, it is important that any franchisee agreed upon has experience in aesthetics, otherwise it maybe detrimental to the brand in the long term. Similarly, if you are the franchisee, what are the franchisor's expectations, and from your experience, are they realistic and relatively simple to execute? Be patient and eventually the right partnership will come along. Do not just settle for the first opportunity that arises.
Communication
Communication is imperative even before signing anything over. Discuss disputes that may arise, how these will be resolved, and how the business as a whole will it will work for both sides. This will ensure that each side knows what they are agreeing to, and reduces the risk of any nasty surprises arising.
These discussions will require flexibility, but it is also important not to back down on important issues if you really don't see that you will be able to fulfil the expectation. If issues are ironed out in the first instance, the partnership is more likely to run smoothly moving forward, as there will be no grey areas. Like in any relationship, if both sides do not work together it will never be a success.
Keep it simple
It is important for franchisors to keep the business model simple. That way, it is easier for franchisees to follow, reducing the risk of any ill-advised deviations. In addition, refrain from opening up too many franchised businesses all at once, without being able to provide ample support.
Don't run before you can walk
It is important that franchisees do not agree to anything that is beyond their scope of managing. If you need help or are unsure of something, ask: that is why support is provided.