Franchising can seem like the perfect way to expand your business. In the franchise world, franchisees are the ones financially responsible for opening the locations and running them according to the franchisor’s regulations. Because franchisees make a big investment to get started, they are highly motivated to drive their businesses towards success. Sounds great, right?
Although it may sound like franchising your business would be an ideal plan, not all businesses are meant to be franchised. Here are four basic questions you can ask yourself before determining if your business is ready to be franchised:
1. Have you perfected your business model?
The first step to determining whether a business is ready for franchise is making sure the business model is both thorough and successful. You must be able to show and prove a successful business prototype that demonstrates a strong unit performance and consumer acceptance. Moreover, the business must be operated by an owner who shows great ability and leadership skills, ensuring that he or she will be able to take on the heavy responsibility entailed in any business expansion.
2. Can you sell it?
Not only does the business model need to work, it also must also be attractive to potential investors. Some of the typical factors that franchisees take into consideration before investing are business credibility, success rate, uniqueness, and how “hot” or innovative it will be in any given market.
3. Can you duplicate it?
One of the key factors in a franchisor’s success is being able to clone or replicate the business easily. If the original business only works because of an exceptional employee or a one of a kind location, franchising will not work. A franchise concept should be straightforward in order to guarantee it will work in different markets and will be simple to operate. When it comes to franchises, simpler is often better.
4. Can you provide franchisees with an adequate return?
Franchisees expect to get two kinds of returns: one, for the time they spend working at the actual business, and two, for the investment they made when they bought the franchise. So you need to ask yourself: will your business model be able to provide these kinds of returns to the franchisee while also providing you the royalty you’re supposed to collect as the franchisor? If your answer is “no,” you will have to go back to the drawing board. Research how you can improve your business model, so you can meet those returns. If you can’t, your business might be better off the way it is and not a great fit for a franchise.
Franchising your business can mean quick, lucrative expansion for your business, but not if your business isn’t fit to be a franchise. Ask yourself these questions to figure out if your business can fulfill these requirements.