If you’re considering setting up a franchise, you’re not alone; company owners everywhere are considering the many benefits of franchising, including wider network access to businesses and the opportunity for business growth without the added costs of additional staff or space.
To franchise a business successfully, it must be right for franchising. This requires considering several aspects before making the decision to franchise. First and foremost, you should know that franchising is not a solution if your business is in difficulty; it is for successful businesses that are already up and running. So here are 5 factors you should consider when deciding whether to franchise your business:
1) Franchising Requirements
The first thing to realise is that franchising a company demands a lot of time, especially at the outset. Time will also be required to ensure that the right franchisees are found and that you have the right level of control over what they do.
A significant financial investment will also be required at the outset, as this is what will allow you to get the right model in place for your business’s future growth. Some investments include marketing materials, legal documents, and recruitment & operations manuals.
A suite of training and support materials will also need to be developed and given to franchisees so they can successfully sell your brand.
2) Track Record
A business that’s suitable for franchising is one that has been in operation for one year or longer. Some kind of track record is necessary, as you must prove that your business concept is viable and will work as a franchise over the long term. Franchisees will need to see proof that they can make money from your brand before they make an investment.
3) Commercial Viability
Your business may have enjoyed incredible success, but will this success continue if the business is franchised? This aspect will involve looking at your market to see whether it has the potential to be replicated in different areas. You’ll also need to consider whether your company’s gross margins are large enough to offer you and your franchisees a viable return on your investment. Looking at demographic information can help with this, here is a great article - Why Do Some Territories Perform Better Than Others? How Demographic Intelligence Can Help.
Income vs. effort is a consideration falling under commercial viability; you need to determine whether the effort you put into managing your franchisees will be rewarded by a reasonable amount of income. You’ll also need to determine whether your business can run successfully without your input and presence.
4) Lead Generation
Do you plan to have a central pool of leads that you’ve found on your own, or do you envision your franchisees generating their own leads? Either way, it comes down to knowing how many territories your business can support, and the income likely to be generated from territory sales and ongoing fees. This information can be obtained through analysis and territory mapping. If franchisees will be generating their own leads, they will require a different set of skills for this.
5) Interpreting Company Data
Your existing company data can go a long way to helping you decide whether you should franchise. However, this data must be correctly analysed to ensure that accurate customer profiles, market size and market penetration estimates are generated.
Franchise Help is Available
It isn’t always easy to make the decision to franchise your business, especially if you’ve never done it before. Luckily, there is a solution available to help you called The Franchise Territory Optimisation Guide. Developed by our franchise and territory experts here at Tech4T, this resource will tell you what you need to know to optimise your franchise territories for ultimate success. Claim your FREE copy of The Franchise Territory Optimisation Guide now by clicking here.