Becoming a businessman does not end with establishing a business alone. There are still many aspects of the business to consider, including strategies on how to expand and reach a wider audience.
Unless you are a conglomerate’s heir, expanding the business using own resources is quite ambitious. However, the franchise concept is a great solution for business owners who dream to grow the business in other places.
Yet, what is the best way to do if you want to use franchising as a way to expand the business? Simple. It begins with the proper evaluation of the business itself.
Evaluating the Business
The owner often has adequate knowledge about the business or his/her company in general. From the business model to the operations and management, the business owner must know everything.
To start with, understand how does a franchise work. It is important to learn the fundamentals of the franchise system and the tips for starting a franchise business. If you manage to learn these things, overseeing the franchise process will come handy with all the other aspects of the business itself.
You can ask yourself this question: Is my business ready to franchise? From here, you can have the following criteria to assess:
Is business working?
First of all, it is essential to know if the business model is working before taking the chance to franchise the business. One has to prove that it is credible and nobody can confirm it aside from the owner.
If you think about it, there is no law that requires a business to show competence in the industry, but certainly, there are many practical considerations to review. It is part of the criteria by which the business’ credibility is being assessed.
Can you sell the business?
Ask yourself if you can sell the business to other people. It is basic to know that to make it available for franchising, the business model needs to be attractive to potential franchisees. Remember that it might be difficult to quantify the “salability” of the business but factors such as credibility, uniqueness, and brand’s “buzz” are helpful.
Is replication possible?
As part of the tips for starting a franchise business, it is a must to know if you can easily clone the business. Of course, as part of the expansion, the business should be replicated by franchisees without any problem.
If the business plan and concept only works because of the location, a great salesperson, or because of 80-hour per week workload of the owner, then, it is safe to assume that it is going to be a challenge. Ideally, the franchise concept should be simple to operate and works in a variety of markets. Potential franchisees can bring some special skills to the business but do not count that unless the business is established.
How feasible is the return?
As the owner, check the return that a franchisee can get after a certain period. Since franchising is a win-win situation for both the owner and the franchisee who is an owner-operator too, he/she will expect to get a return. This is in terms of the time and investment they used for the franchise.
Are you value-driven?
To start franchising your business means maintaining relationships with the franchisees. Mostly, the most successful franchisors are committed to making sure that their franchisees are successful. To do this, the franchisor must be proactive in giving training and support to the franchisees.
Do you have the capital?
It is true that franchising is a low-cost means of expansion, but not a “no-cost” strategy. The fact that you need to have the capital for developing legal documents, manuals, marketing materials, and training programs for the franchisees should be taken strictly. It also includes the cost for any marketing promotions and franchise lead generation.
Although the capital you need is not much compared to expanding the business using the company’s resources, it is still valuable to consider the amount of capital needed to sustain the franchise requirements.
The Five Ways to Know if Your Business is Ready for Franchise
During the entire process, you need to understand how does a franchise work. Then, you must consider the criteria above and make a sound evaluation. However, we want to also hare with you the five ways to consider when checking whether your business is ready for franchising or not.
1. Knowing Your Business Well
Deciding to franchise the business requires a lot more than the business concept. Entrepreneurs should understand this exactly, including what their brand is about, and highlight the concept and plan for the business and franchisees.
A franchise is a system, so entrepreneurs must have solid and organized rules for operations. It must include the methods by which franchisees can attract new customers. Moreover, entrepreneurs must clearly describe every aspects of the branding and operations to everyone, whether the investors or the potential franchisees.
2. Business’ Replication and Operations
There are times that it is easy for entrepreneurs to underestimate the value they personally add to the business. This should not be the case for a company that is thriving into a franchise. It should survive daily challenges and do so without much of the entrepreneur’s personal touch.
3. Teaming Up With the Experts
As the owner, you may think that you know everything. It is one of the common mistakes of franchisors and they must learn to accept the fact that they need the help of experts in the field to succeed.
Building a strong brand means keeping every franchisee on the same page and updating them with centralized business systems. Any franchisor should partner with the right experts and empower them to take on tasks while managing the processes set by the corporate leadership team accordingly.
4. Getting the Right Cost of Franchising
Franchisors need two things: a lot of money and the willingness to lose it all. In this case, entrepreneurs should have a list of partners as investors and a personal financial stake in the venture.
In the long run, costs will quickly multiply for brand development. It prompts potential franchisees to compensate experts and to cover legal fees. Remember to never underestimate the legal fees because these are quite hefty when summed up.
Have a steady cash flow because franchises can’t get off the ground without a steady source of funds. Once the franchise flops, everything can vanish. One big mistake in this area is the fact that people often look too hard at their potential earnings only without considering the potential loss they can incur.
5. Having a Realistic Vision
Dream big and you are going to be successful. Ambitious and realistic dreams are the foundation of every success story, but they can sometimes cause financial ruin to the business.
First of all, to franchise the business, entrepreneurs have to be believe and become visionaries of their products. However, they also need to seriously examine whether their vision is possible in the real world.
Franchising requires commitments, both in good and bad times. The unimaginable nights can come and soon, one can realize that such a dream may be an error in the beginning. If this happens, instead of not facing the real problem, the franchisor must remain optimistic, beyond every imaginable level over the long haul.
Once you consider franchising as an expansion option, expect that there are some repercussions along the way that you need to deal with. It is better to anticipate the problems than being caught red-handed in a situation where you become helpless and hopeless.
So, the main thought is for you to do a thorough assessment of the business and check all its strengths, weaknesses, opportunities, and threats (SWOT). Learning the SWOT analysis is one good way to minimize further damages to the business.
It might be easy to say that the business is ready for franchising but in reality, there are so many things to consider before getting that conclusion. Evaluate well your business considering the criteria and ways stated in this guide.
You can also seek help from experts that can help on franchising the business. Doing a franchise is not only about the will to do it. It also affects the overall business’ operation. Hope that this article can help you understand what it takes to franchise business successfully.
While franchising is a great opportunity, it can also become a downfall when not established properly. We are hoping that by the time you decide to franchise the business, everything will be fine and successful.
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Avoiding Scams, Making Smart Investments, and Better Decisions
The franchise industry is booming, and entrepreneurs are wondering about how this sector works. This ebook aims to help aspiring franchisees achieve their business goals.Learn more