Is Your Business Ready to Franchise?

Is your small business running like clockwork? Do customers from outside your local area ask when you’re opening another location? Are you itching for a new challenge now that your startup is successful? If the answer to all these questions is “yes,” then maybe it’s time to consider franchising your business.

However, these aren’t the only questions you need to answer to determine if your business is ready for franchising.

Also ask yourself:

Do I have strong systems in place?

A good franchise is easily replicable, which means the systems and processes you use for operations can be taught to other people, and the products or services you provide can be standardized (think McDonald’s). If you don’t have an employee handbook and operations manual, for example, you’re not ready to franchise yet. Systematizing your processes is a necessary first step.

Does my business rely on my personal presence?

This problem can frequently arise in service businesses. If you are a consultant, graphic designer or masseuse whose clients only want to work with you, it doesn’t matter how many people outside your location ask for your services—there’s only one of you, and you can only spread yourself so thin. Start training employees to provide the same services you do, get your customers used to working with your team instead of you (perhaps by charging more for your personal services, or using employees to handle new customers) and you’ll be on your way to franchise-ability.

Do I have high tolerance for rules and regulations?

As a franchisor, you’ll need to follow both state and federal laws regarding franchises, such as the FTC’s requirement to provide prospective franchisees with a Franchise Disclosure Document (FDD). Getting up to speed legally and qualifying to sell franchises is time-consuming and costly. If you don’t have the patience—or budget for this, franchising may not be for you.

Have I done market research?

It’s important to research the market for your concept in other parts of the country before you begin franchising. A concept that is hot in one city or state (such as Hawaiian shaved ice) may not translate to other parts of the U.S. without a lot of education. Similarly, if your franchise targets seniors, families with infants or other specific demographics, you’ll want to make sure there’s enough of that group in the regions you’re considering.

Is my business financially sound?

Having one profitable location is a good start, but in general, you’ll want to have at least three successful locations with strong financials before you contemplate franchising. You’ll also need enough working capital to prepare necessary legal documents, market your concept and hire salespeople to sell the franchises, and train franchisees. This can add up to hundreds of thousands of dollars or more.

Do I like teaching and managing?

As a franchisor, your job will be far less day-to-day, in the trenches operations and more corporate manager. You’ll be occupied with identifying new areas for franchise expansion, marketing franchises, assessing potential franchisees, training new franchisees and providing ongoing support to franchisees. You either need to be ready to switch roles or prepared to hire a trusted manager to lead franchise efforts.

If franchising still sounds like fun to you, your SCORE mentor can help you decide if it’s realistic and get you on the path to success. Visit www.score.org to get matched with a mentor today.

Rieva Lesonsky
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