Have you developed a business with a winning concept, solid strategy, and scalable model? You might consider franchising it. In this article, we’ll help you explore why you might franchise your business. We’ll also take on the process you’ll need to follow and how you can find the support you need for this strategy.
Why should I franchise my business?
Franchising is a cost-effective way to expand your operations. Franchisees will provide the capital and time that’s needed to ensure a unit’s success. This brings about some key benefits for you, the franchisor. In many cases, these include:
- Minimal per-unit investment on the part of your business
- Ability to leverage franchisee assets to help your business grow
- Upside of increased profitability from successful units
- Avoidance of lost assets from ventures that fail
- Ability to entrust the daily work and quality of outputs to a motivated, invested workforce that’s unlikely to turn over
- Reductions in risk, which (in many cases) are assumed by the franchisee
Franchising isn’t right for every business. Still, it can be a great strategy for certain companies. Ask yourself these questions to test whether franchising could be the right strategy for your firm:
Does my business have a proven concept?
Prospective franchise unit owners will want to see some verifiable factors to believe in your brand and invest their time and resources into ownership. What are these factors? The most important is a proven concept. You could demonstrate it through any of these indicators:
- The size of your business
- The number of units you have today
- The length of time your business has been in operation
- Customer awareness
- Quantifiable reputation factors within the communities you serve
Will my business work in other markets?
Think about whether your business could succeed in other regions. Often, the businesses that work best as franchises don’t have to work through variances in laws or consumer habits and preferences. Their ideas can work almost anywhere, provided a specific set of practices are followed.
Can I pass along my knowledge to others?
If your practices can be taught to others within a reasonable amount of time, your concept might be a great one to franchise. Your idea is far more likely to succeed through a franchise strategy if unit owners can understand and immediately apply concepts than muddle through confusing details.
Do I have (or can I implement) systems to help franchise unit owners succeed?
Think about whether you have the procedures, forms, tools, and systems in place that will set owners up for success. Almost every business can put these together. What’s important is that they’re assembled, implemented, and tested for success long before you pursue a franchising strategy.
Would it be affordable for others to start a franchise unit, and could they achieve a desirable ROI?
Affordability matters. While there is a host of ways franchise unit owners can raise the capital they need for startup, most will want to pursue opportunities with reasonable, manageable costs. Many will also want evidence that they can recoup those costs quickly and earn a good living after covering their upfront and ongoing outlays of cash.
Does it work within my company’s budget to start this program?
Many of the costs of franchise units are covered by the franchisees. Still, there are legal, marketing, and managerial costs you’ll need to cover upfront to begin a franchise program. Total costs of starting a franchise program can range from about $20,000 to well over $100,000. You can recoup these costs as your franchise program grows, but only if your program succeeds.
What is the process for starting a franchise program for my business?
The best first step may be to open a few company-owned stores before setting up a franchise program for your business. This will help you ensure two things: that your model can scale and that you have a strong infrastructure to help your unit owners succeed.
Once your concept has been tested across multiple locations, you’ll need to implement this set of practices:
- Form your vision and strategic plan to firm up why you want your business to grow and how you want to go about it.
- Put a leadership team in place to manage the franchise program. Try to include members of your operations team or a former franchise executive who can consult on sales, marketing, training, operations, management, or systems needs.
- Outline a new organizational structure to include your new franchisees and regional teams that support them.
- Set up business support systems to help new owners succeed with winning tools, procedures, and processes.
- Create an operations manual to help new owners follow steps to make their effort a success.
- Form a financing program to loan franchisees some of the cash they need for startup. This smart move can help you earn interest on the assistance you offer. It could also create a favorable tax scenario by spreading out large influxes of cash over multiple years.
- Define your franchise real estate requirements and how you’ll support new owners through site selection.
- Create franchisee training programs to assist new owners through ramping up and running the business.
- Form strategies to maintain franchisee relations, including creating an intranet, employing mentors, or developing communications that will help owners of your growing business.
- Work with an attorney to prepare a franchise disclosure document. This 50+ page document will describe the roles and responsibilities of both you and each franchisee. It will cover almost everything a prospective owner would need to know about your business before deciding to invest.
- Form a plan for recruiting franchisees, which may include outreach and developing marketing materials.
Of course, building a franchise program will be an ongoing process. You’ll oversee quality control, maintain relationships with your current and prospective unit owners, strengthen your brand identity, and improve your practices throughout the life of your program. You’ll also continue the work of honing your strategy, optimizing your inputs, and cultivating relationships with suppliers. However, you’ll be able to step back from the daily operations and focus on making your growing business a success.
Who can help me franchise my business?
It’s a great idea to work with a franchise consultant to build your franchise business model and help it start strong. Many owners use Accurate Franchising, a team that’s established more than 2500 locations across 80+ countries. You can learn more about this service here.
You’ll also need to work with an attorney who can review federal, state, and local regulations and develop franchise disclosure documents and contracts.
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Finally, work with an accountant to ensure your financials are in good order. This is important because they’ll be presented to prospective unit owners. To get started, check out some of our favorite business-friendly accounting firms:
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