If you have a thriving business that you want to take to the next level, is it a wise move to franchise your business? In truth, not all businesses are cut out to be franchises. Here’s a checklist of 5 characteristics your business should have if you’re looking to franchise.
First and foremost, you must have a proven business model. While a unique and exciting concept may be likely to attract franchisees, you need more than just the “sizzle” factor. It’s vital to have at least one successfully operating prototype. Consistently strong unit performance gives you credibility with prospective franchisees.
In order to franchise your business you need to demonstrate its potential. It’s easier to attract franchisees if you can differentiate your business from other franchise opportunities. Examples of such a competitive edge include a unique product or service, a relatively low investment requirement, or a compelling marketing strategy. Consider it a good sign if you’ve received unsolicited inquiries about franchising; they indicate you may indeed have a marketable concept.
Could the average businessperson learn to operate your business in a relatively short period of time (three months or less)? If your success is primarily due to a particular location, a rock star salesperson, or 80-hour work weeks, it won’t be easy to “clone.” In order for franchisees to successfully replicate your business, you’ll need all your ducks in a row. This means having established systems that can accommodate rapid growth and all of your operating procedures well documented.
An owner-operator franchisee will expect to get a healthy return for the time that they spend in the business as well as their financial investment. So in order to satisfy franchisees, your business will need to generate returns well above those of comparable investment opportunities. In today’s marketplace, this equates to a minimum 15% Return on Investment (ROI) after the deduction of a 4-8% royalty.
The most successful franchisors are typically those most committed to making their franchisees successful. Your responsibility will go beyond the need to sell franchises, you’ll also need to create ongoing value for franchisees. This means having the knowledge and expertise to train and provide ongoing support to franchisees.
Developing the next great franchise is a worthy goal, but there are many challenges along the way. Make sure your business has what it takes before you take the franchising path. If this list of characteristics comes close to describing your business, you may just fit the profile of a successful franchisor-to-be.