Is your business just begging to be franchised?
It’s not unusual for owners of companies that perform well locally to think about moving further afield. If your enterprise is in high demand, turning a profit, and growing consistently, franchising could have potential. Especially since going regional – or even national – with your small business can mean:
- generating greater brand awareness,
- getting a leg-up on the competition, and
- garnering a higher level of income
Franchising is a billion-dollar industry in the US – one that the IFA (International Franchise Association) promises is poised to continue expanding. But that doesn’t mean it’s the right choice for everyone.
Franchising a business is highly complicated and regulated, and often requires a significant investment of time and money to get things up and running. So if you want to franchise your business, take some time to understand how it works – and to feel comfortable with what it requires.
Is Franchising Right for Your Business?
For a business that’s unique and easily replicated, franchising offers the promise of a quick growth boost and improved profitability. Your company’s potential as a franchised entity may very well hinge on how you answer these questions:
Are your sales the result of doing something different – or better - than everyone else?
Has the demand for your product spread to regions outside your local area?
Have you already been approached by individuals or companies wanting to share your success?
A positive response could mean that franchising is the right move for your business. But it’s important to understand that when you franchise a venture, what you’re really doing is farming out a business concept.
Franchisees are basically investors in your business model, and as such, they have the capacity to add a great deal to your company’s bottom line. Not only do franchisees typically pay a fee for the opportunity to become part of your organization, many make commission payments as well. That means that the more their operations earn on a monthly or quarterly basis, the more money comes back to you.
On the other side of the equation, your franchisees are entitled to certain tools and support in return for investing in your business. As a franchisor, you may be obligated to provide them with:
- assistance in selecting a favorable location,
- access to confidential data or proprietary systems,
- the right to use your business name, logo, and advertising materials, and
- professional guidance on setting up, managing, and succeeding with your business concept
One of the biggest franchisor mistakes is failing to recognize that marketing a concept is a business unto itself – one that involves the dedicated management of various franchise operations. Do you have the time, the mental energy, and the financial wherewithal to juggle what amounts to a second company?
Taking steps to ensure that the timing is right for you to franchise - and that the necessary resources are in place - is critical to keep your primary business from suffering.
A Few Words to the Wise
If you’ve done your due diligence, and are ready to forge ahead with your franchising plans, here are a few tips to help pave the way:
Seek Legal Advice
If you’re planning to franchise, you need a lawyer. Period. From federal disclosure documents, to franchising agreements that adequately protect your business, this isn’t the time to go it alone. State requirements vary, so be sure to look for an attorney who specializes in franchising.
Take an Organized Approach
As a long-time business owner, you probably take your daily operations for granted. But as a franchisor, you’ll need to put together guidelines or a detailed reference manual for potential franchisees that outlines exactly what goes into running your company.
Devise a Growth Strategy
Remember the business plan that got you where you are today – the one that keeps you pointed firmly in the right direction? Take some time to contemplate - and map out - how you’d like to grow your franchising empire, and whether external financing will be needed.
Track Down a Mentor
If you’ve yet to take advantage of what a mentor can offer, this is the perfect opportunity to find out what you’ve been missing. As a franchisor, you’ll be entering brand new business territory. You’ve got nothing to lose – and everything to gain – from having someone more experienced by your side.
Take Care of Your Franchisees
Be sure to offer franchisees your full support, and to check in with them regularly. Encouraging open communication and a team approach will take you further as a franchisor. Remember, the more you look after the people who contribute to your income, the more their operations will look after you.
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