Is Your Business Ready to Franchise?

This week's guest post is by Sarah Kulbatski, professional franchise consultant.
Image: jscreationzs / FreeDigitalPhotos.net
business hierarchy of people

For many business owners, franchising can appear to be an ideal form of business expansion. Franchisees are responsible for the entire investment in opening locations and due to that investment, are highly-motivated to perform well. That allows franchisors to grow and experience brand awareness a lot faster than they otherwise might. But not all businesses are cut out to franchise. If you’re considering franchising, one of the most important questions to ask is simply, “Am I ready?” Here are six basic questions you need to answer to help you decide if your business has what it takes.

1. Is it working?

In order to franchise a business, the business model must first be proven. You will need to show you have got a successful operating prototype.  There’s no law requiring that a franchisor demonstrate competence, but there are a certain number of practical considerations.

2. Can you sell it?

In order to be franchisable, the business model needs to be attractive to potential franchisees. While it is difficult to quantify “salability,” factors such as credibility, uniqueness, and brand “sizzle” all contribute.

3. Can you clone it?

The key to success in franchising is making sure that your system is easy to replicate. If the concept only works because of a unique location, a superstar salesperson, or because an owner is working 80-hour weeks, it is going to be difficult to repeat the magic. Ideally, a franchise concept should be relatively simple to operate and should be able to work in a variety of markets. Of course, potential franchisees can certainly bring some special skills or qualifications to the table, but that shouldn’t necessarily be counted on.

4. Can you provide the franchisee with an adequate return?

A franchisee who is an owner-operator will expect to get a return, both for the time that they spend in the business as well as their investment in the franchise.

5. Are you committed to providing value?

The franchise business is largely about maintaining relationships. The most successful franchisors are typically those that are the most committed to making sure that their franchisees are successful. Creating state-of-the-art training programs, providing innovative marketing and product development, and ultimately staffing your organization so that you can provide frequent franchisee interaction, is a must.

6. Do you have the capital?

While franchising is a low-cost means of expansion, it is not a “no cost” strategy. A new franchisor will need capital to develop legal documents, manuals, training programs and marketing materials, not to mention a marketing budget for franchise lead generation.

Keep in mind, even the best plans will result in failure if the underlying business is not ready for prime time. If you’re considering franchising, take a step back… and ask yourself, “Am I ready?”

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10/30/2012 2:02 AM
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10/30/2012 4:45 AM
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10/31/2012 2:38 PM
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