So, you set up your own business and things are going well. All of the hours you put in are paying off and it’s fast becoming a roaring success. So now what?
When looking at ways to keep going forward many business owners view franchising as the ideal next step. With invested franchisee’s taking on major responsibility for new locations and becoming a new driving force behind the success of the brand, franchising has proven time and again to work across a huge range of industries.
Franchising can be a great way to grow a business, however not all businesses are suitable. While it would be wise when considering franchising as a potential next move, to enlist the aid of a consultant to smooth the path. There are also a few questions you can ask yourself when deciding whether to go down this route.
1. Do you have a viable business model?
That is, is your current business a financial success? While it’s not, strictly speaking, impossible to franchise a business that hasn’t yet proven itself, it may be difficult for budding entrepreneurs to buy into a concept without any real world evidence that it works.
One of the major draws of investing in a franchise as oppose to going it alone is that, as there is an existing business model to follow, financial risks are lowered. Can you show that your framework will generate profit? In order to sell your ideas to prospective franchisees, you may need to prove that your model is viable and will perform well as a franchise.
2. Is it marketable?
Closely related to the first point. In order to successfully franchise your business, you first need to spark enough interest in potential franchisees to make them want to buy in. Those looking for a start-up venture have many options to choose from. There is no shortage of franchises looking to expand.
It may be necessary to persuade potential franchisees that they should invest in your company ahead of many other, well known, established brands. Does your business model have what it takes to compete? Is it a lucrative prospect? Does it have that special something that puts it ahead of the game? If the answer to those questions is yes then you may be onto a winner.
3. Is it a ‘one-hit wonder?’
This should go without saying, but if you want to open franchise locations then you need to ask yourself whether your original system can be replicated. There are many businesses out there doing booming trade that owe a large part of their success to a specific, one of a kind, aspect of their design. Be that a unique location, a killer workforce, or simply the fact that the owner worked 25 hours a day 8 days a week to make it successful. If that’s the case with your business, then it may be very difficult to create that same success in another location, with a different workforce.
The ideal business model for a franchise should be relatively simple, easy to teach and able to work across the board. Does your business need highly specialized skills? If so then it may be more of a challenge for you to find the right franchisee to entrust with your name.
4. Can your business offer adequate return?
One attraction for ‘would be entrepreneurs’ that puts a franchise ahead of opening a business independently, is that the potential risk is lowered by the use of a, proven to be successful, business model. That means that they are less likely to lose out financially by investing in a franchise than they are by starting completely from scratch.
Potential franchisees may need the reassurance of knowing that they will make money by investing in your brand. Show them that with your business model and support they will make enough profit to make their investment of time and money worth it.
5. Do you have the capital?
The beauty of franchising your business is that it can be very profitable- franchisees will literally pay for the opportunity to help you to expand your business. With that in mind, franchising is definitely a low-cost strategy, however, it is not free.
As a business owner, you will need to produce costly legal documents and develop training programs to name a few of the expenses involved. You may also need to invest in marketing your brand to spark interest from potential franchisees.
It takes a great deal of effort, planning and thought to create a franchise without breaking the bank. A franchise consulting company like MBB Managament offers a wide range of these services and can play a vital role in developing a cost-effective strategy.
6. Can you offer the right support?
Yes, many of these questions relate to attracting prospective franchisees, but that’s not to say that once that’s done the work stops. In fact, a new franchise will need a lot of assistance to get up and running. Particularly if the franchisee is inexperienced or new to the industry.
In order for franchising to be a successful enterprise, a business owner will need to provide excellent training and support to ensure success as far as possible.
Even though this need for support may lessen as the franchise becomes more established it will still be there. You may need to ask yourself if you have the means to nurture any potential franchises as they grow.
Franchising is, without a doubt, a great way to expand upon an existing stellar business model, just take a look at McDonald’s! However, it’s not right for every business owner. These 6 questions cannot definitively tell you whether it’s the right direction for you, but they do serve as a good starting point. A franchise consulting firm can help you to gain a much deeper understanding of your needs, and offer sound advice. However, answering yes to these questions is definitely a strong indicator that your business could be a first rate candidate for a franchise operation.