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When Are You Ready to Franchise Your Business?

When Are You Ready to Franchise Your Business?

You have a business and want to expand.  There are a variety of ways to expand the number of locations, company owned, bringing on partners, venture capital or franchising. Many businesses decide that franchising could be an extremely effective way to develop a brand and business model without the intensive capital or staffing needs of other channels. But how do you know your business is ready to franchise and how do you know when is the right time to franchise your business? Here are some items to think about if you’re seriously considering whether to franchise your business.

 

1- Is your business currently successful and how do you define that success? If you want to entice entrepreneurs to invest in your brand, it must have a track record of solid revenue growth, dependable profit margins, and a strong customer/client base. Your business may be ready to franchise if the business has credibility based on current success.

 

2- Why is your business successful? Can that success be achieved in other locations in volume? The success must be due to factors that can be replicated and easily taught to others. For example, if your successful concept is based on a service that’s in high demand and isn’t widely available, your business may be ready to franchise if prospective owners can learn how to run your business model. But if the reason your business is successful is due to being located in one hot market or to having unique skills that make you best suited for success, you may not be able to replicate that success.

 

3- Can you afford to franchise? You may be ready to franchise your business if you have the capital to put the necessary franchise infrastructure in place. You’ll need to hire attorneys to provide legal support and all the necessary documentation. You’ll need to set up training, operations, and marketing systems. You’ll need to cover the cost of state registration fees. You may hire franchise consultants. The cost to franchise can range from $15,000 to $100,00 depending on the business.

 

4- Can you sell your franchise business concept to entrepreneurs? How will you convince anyone to spend the money necessary to open a location for your brand? You’ll need to market your business to prospective owners and sell them on your concept. You may be ready to franchise if you can make the argument that between the franchise systems you’ve put into place and the prospect for customer/client demand and revenue, that your business will be a success for anyone willing to take a risk.

 

5- Are you ready to provide the systems to franchise owners for long-term success? If you’re ready to franchise your business, your franchise plan must include systems for training, operations, administration, and marketing. If your business requires equipment, you need to find ways to minimize those hard costs for owners. You may need to offer assistance with lease agreements or attaining the most desired locations. Your business needs to be turnkey for every franchise owner. You may be ready to franchise your business if you have a solid plan for franchise owner support.

 

For more information on when you should franchise your business, contact us for a free franchise consultation:

https://www.franchisemarketingsystems.com/contact_franchise_consultants/

How do I know when to Franchise My Business?

Most of us in business have considered the concept of franchise expansion at least one time in our business’ build up.  The idea of having other people invest in your business and then operate locations as independently owned and operated businesses under a common brand is a powerful concept, why wouldn’t you consider it?  Then of course reality hits and the question comes to the forefront, is my business ready to be franchised?  Do I have the right elements in place to franchise my business now?  Much of what is discussed during franchise consultations revolves around this common question business owners have who are considering the idea of franchise development.  So what indicators can you look to in order to know whether it is the right time to franchise the business?

 

First and foremost, let the market dictate your timing on franchising.  If customers are asking about opening locations, people are filling out your web contact form asking about franchises and you are getting calls from strangers asking how you started and whether you could help them start the business, the timing could be right.  Nothing is a better indicator as to whether you are ready to franchise then when the potential franchisees are already asking for the business and demanding the franchise.  After all, if you don’t franchise the business, these interested parties will either go elsewhere or just become your competition. 

 

Make sure the business is financially viable and showing profitability that would be enticing to a potential franchise investor.  Any franchisees that you would actually want to buy your franchise will look for numbers that make sense.  In today’s “Item 19 Driven” franchise market, the financials of your business are critical in being able to effectively sell your first franchises.  Good franchise models don’t need to make people millionaires with a single unit, they just need to show consistent income and a strong return on investment for what it takes to get the business open. 

 

Confirm that there is a consumer market demand for your product/service.  You want to see that people are asking for your product line or want your services in more places than where you are today.  If the demand is high, the franchisees will perform well when they open for business in their new market locations, if not, it’s tough to be a successful franchisor.  You typically can find market data on your industry growth online or purchase through industry research databases. 

 

Is your business replicate-able yet?  Some indicators of this are if you are able to hire staff and keep them, put people in leadership positions successfully, open additional company owned businesses and teach what you do every day.  Entrepreneurs that make good franchisors are typically further along in their development as business people and get the idea of delegation, management and putting people in positions to succeed. 

 

For more information as to whether your business is ready to franchise, contact us:

info@franchisemarketingsystems.com

 

When is the right time to franchise your business?

As a business owner, you see, hear and learn new things about your business, the industry and the dynamics that are inherent in a business model. As a franchise consultant, interviewing businesses to help determine when to franchise a business, it typically is easy to recognize how long someone has been at the helm of their ship. There is an evolution of a business owner as they achieve a powerful balance of industry experience, leadership over their business and a keen understanding for the variables which play a part in their business’ success.

Early stage entrepreneurs are drinking from the fire hose and taking in information about the business model at an enormously rapid pace. Their excitement, enthusiasm and energy around what is possible is contagious, fun and always enjoyable to be around. These entrepreneurs typically are not ready for franchise growth as they haven’t figured out the business model and created a solid system which would allow for duplication. Our recommendation is to always start the franchise discussions as early as you see an opportunity for growth, even in this early stage of business development. The planning and strategy can begin early and certainly presents a greater opportunity for the business to succeed in franchising at a later date.

Maturing business owners have been operating the business for two or more cycles and are seeing patterns in their business. They understand the seasonality of the business, employment trends, customer purchasing habits and effective marketing campaigns. Much like a recent college graduate, they are typically excited about the opportunity for growth, but the world is also beginning to present the reality that there may be limitations to the business and good decision making will play a role in how successful the business will be. These business owners could be in a position to consider franchise expansion, but are also still focused on driving profitability and maximizing revenue growth. They would have the ability to write a good franchise operations manual, but there would still be questions throughout the document because every stone had not be turned over.

Businesses that reach adulthood and full maturity are typically three or more years in most cases and have generally maxed out the profitability of a single unit. The business owner is starting to now think outside of the box….how do I replicate this in more than one instance in order to cover more markets and generate more income? Franchising has become a strong consideration along with additional company owned growth, partnerships and new technology. The business is still growing, but at a slower pace and the leadership sees that doing the same thing over and over again won’t continue to grow the business at the desired pace. Mature business owners have become better coaches….they hire slowly and fire quickly and can look at the battlefield with a strategic eye as opposed to being reactive to every day action. The systems and processes are in place that allow the leadership to take a vacation and step away from the business without having a coronary. The ability to teach, train and replicate the business model are a reality and the opportunity for growth is constantly being evaluated.

Many business owners do nothing outside of their day to day management and enter what I have come to refer to “the bored business owner”. Life just isn’t as exciting as it used to be, there is no challenge left in the day as the business owner has seemingly dealt with, overcome and managed every issue the business could present. The business has grown, contracted, expanded and shrunk in some cases several times. Hard work and just pushing the model more with sheer will have grown the corporate business to it’s limits and the operating model is capable of no more. These business owners are sometimes driven to franchising to add excitement back into their professional lives. They want to be bigger than an operator and leverage their experience. In other cases, they may have waited too long to drum up the energy or will to move things forward and take on another endeavor such as franchising. A business owner recently explained that he was going to drop his franchise platform and sell his successful painting business of 23 years in order to start a food concession stand. It seemed like such a shame to not leverage the business model, track record and brand credibility he had built, but the fight was gone and he had apparently just lost interest in the business entirely.

My advice to most business owners considering franchising is that there rarely is a perfect time to consider franchising a business. The variables that should drive this decision should be profitability, systems, market opportunity and people. What can push timelines forward and make franchising a viable option earlier in a business’ lifecycle is the market itself, if people are asking for franchises and the demand is there, the franchise strategy should be considered more seriously. Regardless of what stage your business is in, start the franchise discussions early in order to have a solid plan for expansion in place.

For more information on when to franchise your business, contact us:
info@FranchiseMarketingSystems.com

What makes the Most Profitable Franchise in Today’s Franchise Market?

The Franchise market in the U.S. alone boasts over 3,500 franchises and in many states, the true number of franchise opportunities is unknown.  For a buyer working through the decision making process as to what the best franchise investment might be, this can be a daunting task.

 

It starts with determining your own skill set and abilities, what have you done in the past that could be leveraged in a new franchise business, what skill sets are you strong in and could be a benefit in the new business, what would you like to get out of a franchised business investment?  In most cases, it makes sense to ask someone else to provide an assessment of your abilities, it can be difficult in most cases to be honest and without bias.  There are great tools out there which can provide a personality test or professional skills review for you.

 

Once you have your personal assessment together, you can begin to research which business models fit your profile best.  Some franchise businesses require salesmanship and the ability to be comfortable prospecting for customers while others need an owner operator who has been in retail and managed staff effectively in the past.  If your evaluation is accurate, you will be able to narrow down your selections of franchise industries and be able to determine which categories might make the most sense for you.  When looking for the most profitable franchise, it is important to recognize that the franchise itself does not inherently produce profitability, regardless of how great of a business model it might be.  It is the combination of a good market, good business model and a good operator that makes franchise systems profitable at the unit level.

 

Now that we have narrowed down our industries, it’s time to review the market segment.  There are several ways to look at “market”, one is the area where you would be operating the business from and what customers you would be providing the goods or services to.  You should do extensive research on your area and determine whether that market has the right demographics, income levels and population density to support the franchise businesses you are considering.  Use online data to start your research, sites like www.Score.org are a good start, then get specific with direct research by interviewing business owners and professionals who would have relevant experience related to the business in that market.  The second “market” is the overall industry you are considering entering with the franchised business, food service, cleaning or accounting would be considered in this category.  You now need to research the potential growth for your industry, competition, market trends….how will technology affect this industry?  All of these elements could make your franchise more or less profitable and if you don’t do the planning prior to your franchise purchase, you could unknowingly be making the wrong move.

 

Now it’s time to research the franchises themselves.  You should have a list of at least three concepts that interest you and warrant additional research.  Start by researching any available data on the franchise brand, what has worked, what hasn’t, why have there been failures in the market, why have some franchises succeeded?  Review the FDD in detail, read all 23 Items and the exhibits to the document including the Franchise Agreement and Financial Statements.  Ask the franchisor about every question that comes to mind and take good notes.  Towards the end of the FDD are other franchisees who are either in the system or have left the system, take the time to call and interview them about their experience with the franchise brand.  Go visit the franchisor AND franchisees, interview them in person and ask detailed questions.  Compile your data and compare the brands to one another, then do the gut check as to which franchisor you feel the most comfortable working with and who you could envision yourself “married” to.

 

At that point, you have most likely discovered the Most Profitable Franchise.  I’m sorry it isn’t a one word answer, but if you take the time and invest in the process of researching the right franchise, you certainly have the best opportunity to realize a good return on your franchise investment.

 

For more information on how to buy a franchise, Contact Us:

Info@FranchiseMarketingSystems.com