There are few business ventures as exciting and rewarding as franchising. If done correctly, it is a proven way to grow your business, expand into new territories and create extensive revenue streams.
Are you ready to franchise your business?
There are a lot of factors to consider before deciding if you’re ready to expand into franchises. Always proceed with caution and ensure your business is in a place where franchising is the next logical step. Otherwise, there could be financial consequences that set you back. For business owners that are determined to move forward with franchising, it could be the difference between a successful business and an international empire.
There’s a lot to consider and many elements need to be in place before you can franchise successfully.
Let’s review some of the key questions a business should ask itself before moving forward in the franchising process.
1. Can your business model be consistently replicated?
A strong business model is imperative for a business to be successful but even the strongest models can’t necessarily be reproduced by someone else. If your business’ success is reliant on your expertise, location, and existing clientele, then it might not work once you remove those elements.
The systems that run your business need to be easily reproducible for another person who might not have your experience or abilities. Remember, your business model needs to be reproducible because you, as a business owner, are not.
2. Will you have access to a large pool of potential franchisees?
Much like how your business is reliant on a large market of potential customers, franchising requires an extensive market of potential franchisees. These are people or investment groups who can meet the criteria that you establish such as financing, references, and relevant experience, to name a few.
A viable market can drive franchising opportunities, but if the market is limited then franchising might not even be an option.
3. Do you have the right team in place?
You will need the right team to execute a franchising strategy. This team will be required to scout for potential franchisees, handpick those who are the best fit, and then train, support, and manage those who come on board.
Many new franchises might be operating in different cities, provinces, or countries, so you need a management team that is capable and well-equipped to take on this challenge.
4. Do you have the funds needed to franchise?
Franchising your business costs money and the start-up fees from franchisees will not be enough to finance this operation. You need available funds to bankroll what is essentially a massive expansion plan. In most cases, it will take many franchises to create a steady stream of revenue that will support your franchising objectives and your flagship location.
5. What are your financial risks?
As profitable as franchising can be, it comes with several risks. Identify the risks associated with your business, including your current financial risks, as this will be important for potential franchisees to know.
This process involves accounting for all the potential liability a franchisee could incur. This will mitigate surprises and allow for better preparation, more informed decisions, and fewer headaches.
6. Do you have an established brand?
It only makes sense for businesses with an established and recognizable brand to consider franchising. Remember, a large part of what you’re selling is your business’ trademark, reputation, and brand value. You need to confirm that your brand is recognizable, well-respected and that it will play in other markets.
The next step is to implement quality control protocols to ensure franchisees can adhere to a set of brand standards as consistency will be key across all franchises.
7. Are you ready to oversee a larger operation?
Running your business is challenging, but it will be nothing compared to managing an organization of multiple franchises, each with a franchisee who will require ongoing help, support, and guidance.
Some of the responsibilities include:
- Crafting marketing strategies that can be executed by each franchise.
- Training and supporting new franchisees.
- Ensuring your franchisees are maintaining strong relationships with their customers, communities, and vendors.
- Scouting new territories for franchise opportunities.
- Updating your franchisee guidelines and regulations as needed
Your role will expand, and you will be faced with new responsibilities, possibly in addition to your current ones. If you’re not prepared to manage a heavier workload, you will need to hire someone or a team who can.
8. What’s your exit strategy?
Your exit strategy should be communicated to potential franchisees during the early stages of the process. You want to mitigate any potential concerns they might have over leadership changes at your company’s executive level.
Typical exit strategies for franchised businesses involve:
- Choosing a specific time frame in which to sell a significant portion of your business.
- Hiring and training a manager to run your business, including the franchisees, as you gradually step back from day-to-day operations.
Rob Shapiro | Contributing Writer