Expanding Your Business By Franchising
The following questions can help you determine if you meet the basic criteria and willingness to expand your business through franchising.
Keep in mind that no one is ready to franchise until they have gone through the process. But there are some criteria to determine if there is a likelihood of success. Answer these questions and see how you measure up.
1. Are you credible? Credibility is reflected in a number of ways: size, number of units, years in operation, look, public awareness, profitability, strength of management, public satisfaction, etc.
2. Are you sufficiently different? This comes in the form of quality and/or need of the product or service, a reduced investment cost, a unique marketing strategy, target markets, a great system, a unique name and/or brand, etc.
3. Can your knowledge be transferred? Can you teach your system to others? Generally speaking if the business is so complex that it cannot be taught to a franchisee in 3 months, it may be difficult to franchise.
4. Can your business concept be adapted from one location to another? Issues such as state laws and regulations, consumer tastes or preferences, unique locations, or the talents of the person behind the concept should be considered. Another factor of adaptability is the anticipated size of your franchise system (over 50% of all franchised companies have 50 or fewer franchisees–you don’t have to have thousands or even hundreds of franchises, and don’t have to be national or even regional)
5. Is your system proven? In other words, your system works, and while it may need to be refined, it is a successful prototype. This does not mean that you have to have more than one location. Many people think they have to open more outlets and prove them before they can franchise. This is not true.
6. Is your system documented? While all successful businesses have systems, not all are adequately documented. (We help you document your policies, procedures, systems, forms and business practices in a comprehensive user-friendly operations manual and/or a computer-based training module.) Y ? N ? Please explain your answer.
7. Is your system affordable? Affordability reflects a prospective franchisee’s ability to purchase your franchise, and not just the actual cost of the franchise.
8. Will your franchisee receive a return on investment? This is the real acid test of franchisability. A franchise must be profitable, but profitable after your royalties are paid. (Profitable also includes the franchisee being able to make an income.) Profitability is always relative, and must be measured against other investments of comparable risk that compete for the dollar.
9. Are there market trends and conditions that will affect your franchise? While not an indicator of franchisability, trends are a key to planning and timing. Will you miss out by waiting?
10. Do you have the capital to franchise? While franchising is a low cost means of expanding a business, it does cost around $25k-$35k to Franchise. You will need the capital and resources to develop a franchise program.
11. Do you have a commitment to relationships? Successful franchisors focus on building relationships with their franchisees that are mutually rewarding. Strong relationships enable you to sell franchises more readily and introduce needed changes into the system more easily.
12. Do you have the strength of management? This is probably the single most important component. A single most common contributor to the failure of franchisors is under staffing and lack of experience. Not experience in Franchising, but rather, experience in your business.
How did you do? Can you say that your company is a candidate for Franchising?