If you are a business owner, franchising may seem like an ideal way to open more branches and expand your reach. After all, prospective franchisees pay all the start-up costs, which makes them more motivated to do well in the business. And this gives you, the franchisor, the chance to grow your brand more quickly than you might be able to do on your own.
However, not every business has what it takes to franchise.
When considering franchising, one important question you need to ask yourself is, “am I ready to franchise.” In this article, we will discuss six basics that will help you determine whether or not your business is ready to start awarding franchises.
1. Is my business working? Your business model must be proven to work before you can decide to franchise your business. Although franchisors are not required by law to show competence, there are many things that need to be considered. You will have to demonstrate that you have a successful business to establish credibility in the franchise space. When Alpha Touch reached out to us for franchise consultation in 2017, the massage company had just two business locations and started operation two years prior. However, the business model was already showing signs of solid performance at each unit level and was well-loved by consumers. Alpha Touch’s owner, Matthew, was also able to pick up things quicker than most new owners would since he has already owned and operated different health clubs before.
2. Is it sellable? Your business model must also appeal to prospective franchise owners before you can consider becoming a franchisor. It’s hard to tell how salable a brand will be, but factors like uniqueness, credibility, and brand “sizzle” play a key role. Even though Alpha Touch was recently founded, the company had a credible management team, and its business concept was very appealing. Within just a few years of operation, they already received plenty of franchise inquiries, which shows the brand’s salability.
3. Can it be cloned? To succeed in franchising, your franchises need to be easy to clone. If your business concept is working solely because of your unique location, an outstanding sale representative, or because you put in 80 hours per week, it may be difficult for your franchisees to replicate the magic. Generally, a franchise concept should be easy to operate and flexible enough to work in a wide range of markets. While your franchisees will likely possess some unique qualities and skills they will bring into the business, you cannot rely on that. One of the things that helped in Alpha Touch’s case was its simplicity. The business concept was easy to teach and replicate.
4. Will the franchisee get an adequate return? When a franchisee buys and operates a franchise, they expect a nice return, not only for the time put into the business but also for their franchise investment. Although Alpha Touch was a young business at the time, we predicted that their franchisees would receive higher returns with them than with other similar investment options, even after the royalty fee had been deducted.
5. Are you dedicated to providing value? The franchise business is actually all about building and sustaining relationships. Successful franchisors are usually those who are most dedicated to ensuring that their franchise owners succeed. We could see right from the beginning that Matthew and his management team wanted to establish a top-quality franchise company that would try its best to help its franchisees become successful. The company created several training programs, sought the services of a leading consumer ad agency, and hired more employees to ensure frequent interaction with franchisees.
6. Do you have the money to start a franchise company? Although franchising is a less expensive way to grow a business, you will still have to spend some money. As a new franchise, you are going to need capital to create training programs, legal documents, operating manuals, and marketing materials. You will have to make a marketing budget to generate franchise leads. Alpha Touch was just a few years old when it decided to venture into franchising, so the company carefully designed a franchise strategy that would work without going over budget.
Bear in mind, though, that even with well-crafted plans, you can still fail as a franchisor if the parent business is not franchise-ready. So, if you are thinking of franchising, sit back and ask yourself, “is my business ready to franchise?”
