Most of us in business have considered the concept of franchise expansion at least one time in our business’ build up. The idea of having other people invest in your business and then operate locations as independently owned and operated businesses under a common brand is a powerful concept, why wouldn’t you consider it? Then of course reality hits and the question comes to the forefront, is my business ready to be franchised? Do I have the right elements in place to franchise my business now? Much of what is discussed during franchise consultations revolves around this common question business owners have who are considering the idea of franchise development. So what indicators can you look to in order to know whether it is the right time to franchise the business?
First and foremost, let the market dictate your timing on franchising. If customers are asking about opening locations, people are filling out your web contact form asking about franchises and you are getting calls from strangers asking how you started and whether you could help them start the business, the timing could be right. Nothing is a better indicator as to whether you are ready to franchise then when the potential franchisees are already asking for the business and demanding the franchise. After all, if you don’t franchise the business, these interested parties will either go elsewhere or just become your competition.
Make sure the business is financially viable and showing profitability that would be enticing to a potential franchise investor. Any franchisees that you would actually want to buy your franchise will look for numbers that make sense. In today’s “Item 19 Driven” franchise market, the financials of your business are critical in being able to effectively sell your first franchises. Good franchise models don’t need to make people millionaires with a single unit, they just need to show consistent income and a strong return on investment for what it takes to get the business open.
Confirm that there is a consumer market demand for your product/service. You want to see that people are asking for your product line or want your services in more places than where you are today. If the demand is high, the franchisees will perform well when they open for business in their new market locations, if not, it’s tough to be a successful franchisor. You typically can find market data on your industry growth online or purchase through industry research databases.
Is your business replicate-able yet? Some indicators of this are if you are able to hire staff and keep them, put people in leadership positions successfully, open additional company owned businesses and teach what you do every day. Entrepreneurs that make good franchisors are typically further along in their development as business people and get the idea of delegation, management and putting people in positions to succeed.
For more information as to whether your business is ready to franchise, contact us: