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Are You Ready to Franchise Your Business?

Franchising can offer the opportunity to expand across a region, or around the world. The payoffs may be potentially large, but it takes a lot of work.
Contributing Writer,
January 31, 2017

Customers who love your business may often urge you to open more locations or start franchising—and that might not be a bad idea. If you have big dreams for your business, franchising may be an ideal way to grow it into a regional, national or even global empire.

But how do you know if your business is ready for franchising? Start by asking yourself these questions:

Do I have operations systems and procedures in place? If you run your business by the seat of your pants, it may be possible to succeed at one location or even two or three. However, you likely won’t be able to teach other business owners—that is, your franchisees—how to operate the business with the same degree of success. A key part of helping franchisees grow is often having replicable procedures.

Can others be taught how to run the business fairly easily? If your business relies on your unique skills and knowledge—for instance, if you’re a fashion consultant who uses your natural flair for putting together outfits to help your clients build their wardrobes—it may be hard to franchise, because so much of the business is in your head. An ideal franchise typically does something that others can easily learn to do, such as cleaning carpets or preparing pizzas.

Does your product or service have widespread appeal? Your business may be a hit in your market, but will it be equally popular in other parts of the country? An ice cream shop that has lines out the door in warm Arizona may not do as well in chilly Maine. Also consider whether you'll be able to get the materials, supplies and skilled employees you need in other locations. For example, a fresh seafood restaurant in Florida might have trouble shipping fresh supplies to a franchise location in Montana.

Is there a unique selling proposition that attracts attention? Your plain old pizza parlor may be a hit in your local community, but to be franchise-ready, it typically has to have an edge. What makes your business unique enough to attract attention from prospective customers? Perhaps your pizza parlor lets customers stand in an assembly line and put toppings on their own pies, or sells a proprietary super-delicious pizza crust.

Ready or Not?

By now you may have a good idea of whether your business is suited for franchising. Equally important is the question of whether you are ready to be a franchisor. Creating and running a franchise system may require a different set of skills than opening and running your own business. You'll likely be spending less time in your business and more time meeting with attorneys, developing a marketing plan and finding financing for your venture.

Equally important is the question of whether you are ready to be a franchisor. Creating and running a franchise system may require a different set of skills than opening and running your own business.

Once your franchise system is up and running, you may be even more removed from your actual business, as you will need to focus on attracting, vetting and training franchisees, then providing them with ongoing support. In short, you'll likely be taking on more of a corporate role—which may or may not be what you want.

Getting Financed

Speaking of financing, franchising your business can require pretty deep pockets, so if you thought the fundraising days of startup were over, think again. You’ll probably need money for attorneys’ fees to ensure you’re following the regulations involved in franchising. You may also need a budget for marketing your franchise concept, developing training materials and hiring a sales team and support staff. At the same time, you need to keep your original business thriving—otherwise, how will it look to potential franchisees?

Have you ever opened a second location? If so, you may have gone through some of the growing pains of franchising, such as finding a location, training a store manager and marketing your brand in an area that may not be familiar with it. If you haven't opened a second location on your own, doing so can be a sort of test run for franchising. Treat your new location’s manager as if he or she is a franchisee, and see how well you are able to train that person and replicate the success of your original location.

If you're seriously considering franchising your business, consider developing an employee training manual if you don’t already have one. Also consider writing a business plan for franchise locations just as you would for any new location. Pay special attention to the financial part of the plan: Will the franchise fee, ongoing royalties and other payments from franchisees surpass the cost of finding, training and supporting them? If so, you may have a potentially franchisable business.

Read more articles about expansion.

A version of this article was originally published on January 18, 2016. 

Photo: iStock