Is Your Business Ready for Franchising?
Is your business ready for franchising?
The statistics from the International Franchise Association are simple and compelling. Every 8 minutes in the United States a new franchise opens its doors. At the last official count there were 828,138 franchises in the United States, which provides 9,125,700 jobs supporting an annual payroll of $304.4 billion producing goods and services of $802.2 billion.
Does this therefore mean every business owner should be able to franchise their concept? If you own and operate a business, does this mean franchising is right for you?
The answer to the last two questions should be a simple ‘no.’ However, if you are looking at the criteria to help you make that decision, here are eleven factors to consider.
These questions come from looking at whether your business is ready for franchising in the eyes of a franchisee. After all, a franchisee is going to have most of the final say whether they buy your franchise and therefore how successful you will be.
For a franchise to be successful or for franchise buyers willing to take a huge personal and financial risk it has to be authentic and have credibility. If your business is not quite at that point, get it there before putting it out into the market.
2. Strong franchise management and leadership
Franchise buyers are buying the concept. The concept was put together by the owner and their team and it reflects their integrity, skills, ability to communicate, and most important of all, the results they have generated. This is one of the most important aspects of the franchise and will determine its success or failure.
3. Sustainable and proven franchise model
Franchise buyers have plenty of concepts to choose from. Each potential franchise buyer moves through the buying process including attending a Discovery Day which is generally at the franchisors head office or nearby. The model or prototype the franchise buyer sees has to “Wow’ them and the “Wow’ factor sells. Do you have a model or prototype that ‘Wows’?
4. Different than other franchises
Everyone buys differences including franchise buyers. Pepsi or Coke. Ford or GM or Toyota. AAMCO or MAACO. A franchise concept must be adequately differentiated from its franchise competitors.
5. Positive market trends
Was cupcakes a fashion or positive new market entrant with positive trends? What about yogurt? What about pet care? Franchise buyers are looking for positive market trends and growth opportunities which they want to take advantage.
6. Affordable cost of capital
The franchisor requires the franchise buyer to make a capital investment in their concept. It therefore has to be affordable.
7. Return On Investment
It not only has to be affordable but it also has to provide an adequate Return On Investment to the franchise buyer.
A franchise buyer will typically need to borrow to fund part of the purchase of the franchise and its start up. The franchisor therefore needs to provide a concept that third party lenders including the SBA will be willing to loan against.
The franchise buyer wants initial training so they can get their franchise up and running and profitable as fast as possible. This therefore requires clearly documented systems and processes and these have to be kept up to date to keep the franchise concept relevant as the market and customer needs change.
The franchise concept can’t be successful just in one or two local cities or markets, it must be versatile and adaptable to work in all markets.
11. Built on positive and continuous relationships
Just like owning and operating a business is not a destination, that is, you never ‘arrive’ as things are always changing and hopefully going from good to better, a successful franchisor will have relationships with key suppliers and all the franchisees so everyone is successful.
There are companies that specialize in helping a franchise build and get ready to hit the ground running. They assist with strategic planning to grow the franchise, help with the mandatory legal documentation to meet federal and state requirements, franchise operations and training documentation, marketing services to attract franchise buyers and owners, support sales and training material and more.
In a nutshell, these companies help a business that has never franchised before, companies that are currently franchising and need to improve or want to grow quickly and companies that currently sell through dealers or distributors and want to see if franchising is right for them.
Give me a call on 916 570-2674 and let me connect you with the right franchise developer that can get you where you want to be or you are welcome to send an email to Andrew Rogerson.