Franchising your business can be a great way to grow your business. When you franchise your business, you basically sell your product, name and way of doing things to others (franchisees) who pay you a fee for the chance to duplicate your success.
But franchising your business takes a fair bit of preparation and is only a viable option for those businesses that are “ready” to franchise. Is franchising your business for you? Ask yourself these questions to see if your business is ready to become a franchise.
1. Is it possible for others to duplicate your success?
Many successful businesses are successful because of the business owner, not the business’s products or services. He or she has the charisma and/or salesmanship coupled with a particular skill set that draws customers and brings them back. If your success is dependent on your own flair and skills, franchising your business is not for you.
2. What’s your unique selling proposition?
In other words, why would people want to become franchisees of your business rather than just doing what you did themselves? There has to be something unique about your product or service or something about the process for creating your goods that’s difficult to duplicate for franchising your business to be profitable. That doesn’t mean that your product or service has to be exotic or ground-breaking. One successful local franchise refills ink cartridges; another hauls junk. It’s the way the process is done or the service is delivered that makes it franchise-worthy.
3. Do you have a system that can be duplicated and monitored?
When you franchise your business, it’s not actually your product or service that you’re selling to others; it’s your system. Franchisees aren’t just buying the right to sell your product or service, but your manual of operations that will allow them to do things exactly as they’ll be done in every other location of your franchise.
The most common kind of franchise is the Turnkey operation. The franchisee expects to be able to walk into the business and run it successfully, as the franchisor provides everything from initial inventory and staff training through accounting and promotion. In other words, when franchising your business, you are providing a blueprint of the operations, training, marketing, financial and legal aspects of the company. Franchising your business is not for start-ups or businesses that haven’t worked out the kinks.
4. Do you have more than one location now?
Deciding to franchise your business when you have only one location is dangerous. Until you’ve “transplanted” your successful business to another location at least once, you won’t know how much of your business’s success is dependent on local conditions. Opening another location before franchising your business will also give you the chance to test the system you hope to franchise and revise your franchising plan as necessary.
5. Do you have the money you need to franchise?
Franchising your business isn’t cheap. Developing your franchise concept will cost you both time and money. Besides the obvious costs, such as getting the expert advice of lawyers, accountants, and franchise consultants to help you put your franchise package together, you’ll also need to market your franchise opportunity. And all of these costs will be incurred before you’ll see any franchise fees roll in from your new franchisees. Financing your franchise expansion will definitely be a important part of your plan to franchise your business.
Is franchising your business for you? Perhaps the best indication of all is whether or not you’ve already had franchise inquiries. Franchising is a very popular choice for people who want to start businesses – especially if the start up requirements for franchisees are $25,000 or less.
If you’ve answered “yes” to the first four questions on this “are you ready to franchise your business” list, don’t let a lack of funds deter you. If you already have an established, successful business and a developed plan for franchising your business, you’ll find traditional financing easy to get. Traditional lenders, just like you, recognize what a profitable investment franchising your business can be.
