This is the second in an 8 part series of blog posts on the basics of How to Franchise Your Business. Not sure if you should franchise your business or not? A franchise consultant can help you determine if your business is franchisable. The series is a primer for those who are relatively new to franchising and who might be considering franchising their business.
The following criteria provide a general starting point in evaluating the franchisability of a business. While there are many variables and factors to truly assess a business’s viability, these points should help in the initial assessment. A consultation with a seasoned franchise consultant can provide a more precise analysis to fully determine franchisability.
The following factors can help you make this determination:
- The business must be in operation and have proven its commercial prowess. This means that the business should have been in operation for at least three years.
- The business must have national adaptability. This means that the business should have a stable and reliable market both locally and nationally.
- The business has to be profitable. A profitable business plays a major role in allowing both the franchisors and the franchisee to earn a decent and reasonable salary at all times. Essentially a franchisee should be able to generate a 20% return on their cash investment, plus earn a manager’s sales if they are the owner/operator.
- The business should have something unique or special that makes it stand out from the rest. It needs to offer faster, better, juicier, more affordable, or more reliable products and services to clients in its own unique way. What makes your business a better mousetrap than the rest of the industry?
- Availability of funds or finances – The more a franchisee can get the required financial support, the more a business can be franchised. Furnishings, buildings, receivables, and fixtures are all easy to finance and make it easier for businesses or companies to create leverage.
- The business concept must be teachable to franchisees within a reasonably short period of time. Franchisees must be given proper and comprehensive training and coaching before getting into the franchising business.
Success Seems to be connected with action. Successful people keep moving. They make mistakes, but they don’t quit. Conrad Hilton, Founder of Hilton Hotels. A franchise consultant can help you determine your strengths and weaknesses with regard to the above-listed factors.
It is important for franchisors to understand that not all potential franchisees are entrepreneurs. In fact, most of them are not what someone typically thinks of as a traditional entrepreneur. Instead, most franchisees are either employees or unemployed seeking to improve their financial status and/or have recently left their jobs and are looking for ways to become their own bosses.
The Mentality of Owning a Business
The common thing about the two groups is that both have the mentality of owning their own business but in one way or another, lack the required capital, industry experience, or business skills to make it happen on their own.
They, therefore, benefit from taking end advantage of established business systems capable of providing them with some or all of the most important benefits of franchising.
This includes cooperative advertising, operational support, and training, access to financing and site selection, successful marketing ideologies, and guaranteed mass purchasing power. A franchise consultant can help you set up these systems to ensure success. We hope that this will blog post will start to answer your questions on how to franchise your business.
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- Ensuring Fair Compensation as a Franchisor: Strategies for Payment Oversight - August 23, 2023