Should You Franchise Your Business?
You've got a thriving business and customers are lined up around the block. Your friends say that you should strike while the iron is hot and start franchising. Even your spouse is whispering in your ear, "you could be the next Ray Kroc." Looking at the industry, it seems just about any kind of business can be franchised, so why not? It may well be that your business is ripe for expansion, but it may or may not meet the criteria for a successful franchise. Here are some basic guidelines to determine if your business is a good candidate for franchising:
Is your concept proven? People buy franchises so they don't have to go through the trial-and-error themselves. Your track record should include strong and steady sales growth, experienced management, good press, and growing brand awareness.
Is your concept unique? Your business needs to be clearly different from other players in your industry. Take a look at your competitive advantage. Is it sustainable?
Can your concept be duplicated? Your system(s) must be teachable with a short learning curve - three months or less is optimal. Operating procedures need to be documented along with a checklist for quality control and training procedures.
Will your franchisees see a good return on their investment? Your franchise units should be able to generate a 15 to 20 percent return on investment after deducting the royalty.
Do you have the time to start franchising? Make no mistake, this is not the easy road to expansion. You'll work longer and harder than you ever have before and it will be at least 2-3 years before it eases up at all.
Do you have the money to franchise? A big reason why businesses franchise is because it's more economically feasible than starting a chain. But that doesn't mean it's cheap. Capital resources for a new franchise typically run into hundreds of thousands of dollars.