Should You Franchise Your Business?

Youve got a successful business, and want to grow it rapidly. Should you franchise your business? We examine how to tell its ready to franchise and explore how to decide if you should.

Important Things to Consider Before Turning Your Business Into a Franchise

Franchising a business is often considered the easiest way to grow business. Business owners can scale up their business faster by getting franchisees on board, while they focus on the things that they do best. 

When selling franchises, you receive an injection of capital from each franchisee (the initial franchise fee) and benefit from ongoing royalties or fees during the lifetime of the franchise.

Essentially, franchising your business is about taking your brand, systems, intellectual property, and knowledge and duplicating your day-to-day operations manual and business model so your franchisees can be successful. Therefore, you must own a successful business to become a successful franchise business.

Is your business franchisable? If so, should you franchise it for business expansion?

Is your business ready to be franchised?

Before you jump into the franchise industry, there are some things that you should consider. You’ll need a good long-term track record in business, with reputable products or services to become a franchise brand.

Here are seven factors you will need to consider before deciding if your business is franchise ready.

  1. Business credibility

If you are interested in franchising your business, you must evaluate your current business credibility before making a decision. The following are some questions you should ask yourself:

  • Does your company have experienced management?

  • Does it have a long-term track record?

  • Is the business concept proven?

  • Have you achieved good public acclaim (press, social media presence, etc.)?

  1. Uniqueness

If you are considering franchising your business, then you need to make sure that it is unique, with strong branding that sets it apart from its competitors. If you are considering franchising your current business, here are some questions you should ask yourself before taking that step:

  • Does your business differentiate from its competitors?

  • Is it marketable as a business opportunity?

  • Does it have a sustainable competitive advantage?

  • Is your unique selling proposition solid?

  1. Scalability

Though your business may be successful in its current format, is it scalable from where it currently stands? You’ll need to consider:

  • Can your business model be successfully replicable?

  • Can you cultivate a pool of prospective franchisees?

  • Are operating procedures documented?

  • Could new franchisees learn your business system quickly (less than three months)?

  • Can you train franchisees to deliver the same products or services that have made your business successful?

  • Could you develop the training and support systems that new franchisees will need from you?

  • If they follow your business model and operational systems, could franchisees become profitable?

  1. Industry

Not all industries are franchisable. For example, if you operate in a highly regulated industry, franchising your business is likely to be more difficult. The same applies if your business is in a sector that is dominated by one or two big players, or state-owned companies. It’s also challenging for partnerships (such as attorneys or accountants) to franchise their businesses.

  1. Brand protectability

Before you make the leap into franchising your business, it’s important to understand how your brand will be protected as part of the process. The franchise agreement specifies that the franchisee will use the franchisor’s trademarks and service marks in accordance with their policies and procedures. The franchisor also has the right to terminate or refuse the renewal of a franchise agreement if the franchisee doesn’t comply with these policies and procedures. Over and above this, answer these questions:

  • Is your business USPTO registered?

  • Do you have rights to a website address with your brand name?

  • Are there other businesses with a similar brand name that can be confused with your business?

  1. Budget

Though there are many financial benefits to creating a franchise business, like any business you must budget to achieve your goals. You’ll need to consider:

  • What is the cost to launch a franchise system with an infrastructure that is unique to your business and designed to achieve growth?

  • What is the cost to protect your trademarks and brand?

  • What is the cost to register your FDD in the franchise registration states that you are targeting?

  • After you launch your franchise, what are the ongoing legal costs to maintain your FDD and registrations?

  • After you launch, what are the costs for promoting and marketing your franchise?

  1. Potential returns for franchisees

To attract suitable franchisees to invest in a franchise opportunity with your company, you must be able to demonstrate that they have the potential to make an attractive return. Typically, this should be at least 15% to 20% on their investment by the third year at the latest.

Should I franchise my business?

If your business is franchisable, you’ll need to decide whether to franchise. When helping businesses make this decision, experienced franchise consultants help the business owner to answer questions that include:

  • What are your personal goals?

  • Can you commit to a one-year, two-year, and five-year plan to build out your franchise system?

  • Do you have the time to learn how to franchise?

  • Do you envisage that your role in the business will change? How do you expect it to change?

In terms of your business goals, you’ll need to explore if you are ready to:

  • Grow the reach of your brand, entering new markets across the United States

  • Develop systems to train and support new franchisees

  • Partner with franchisees as part of your brand

  • Create a corporation that will eventually become bigger than your current team

You’ll need to gain a deep understanding of how the franchise concept works in practice before making franchise sales, and only decide to franchise after:

  • Evaluating the strengths and weaknesses of your business

  • Considering what makes your business unique within your industry

  • Evaluating the cost of switching to the franchise model

  • Understanding what comes after you franchise your business

Where do you start?

It’s crucial that you partner with professional franchise consultants that have experience in helping businesses like yours adapt to and adopt the franchise model. They will be able to support you and your brand as a new franchisor.

They will also be able to connect you to franchise conferences and trade shows to network with other franchise professionals and franchisors who have been through the franchising process.

Finally, a franchise consultant will help you develop your marketing plan, and connect you with potential franchisees.

Are you considering franchising your business, or seeking potential franchisees for your business?

Book a free consultation with New Ground Consulting today to benefit from our direct franchise industry experience.

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