Your company is doing great. You have a steady customer base, you’re making a profit, you’ve hired more staff, and you’re just now thinking that it’s time to expand in some way. Franchising seems like the most obvious choice–having more locations and franchisees who can take on the work of managing those multiple locations seems like a dream.
But it can be hard work to start up a franchise, even for the most successful business owners. Before you dive in, you should ask yourself these 7 important questions to see if it’s the right path for you.
1. Is Your Business Profitable Enough To Franchise?
Of course, the first thing you must consider is whether it’s worth franchising your company to begin with. Even if you’re successful fairly soon after starting up your business, you should focus on building up a consistent, reliable customer base before jumping into a franchise.
And, even if you’re an established business, you’ll want to take a good look at your finances and see if you can afford the various costs of starting a franchise–not just in franchise fees and start-up costs, but also time and labor. It’s an investment no matter what side of the franchise you’re on, and you don’t want to go bankrupt trying to expand.
2. What Are Your Time Commitments?
Starting a franchise is a great deal of time-consuming work. Not only will you be working to sell your business model to potential franchisees, but you’ll also still need to keep your flagship business up and running. Ensure that you’ll be able to split your time without burning out or consider whether you want to divide the workload–either by adding more management or a co-owner for your business, or outsourcing your franchise development.
3. Can Your Business Model Be Easily Replicated?
A good business model doesn’t always mean it’ll make a good franchise model. While your business may be a standalone success, is it the sort of business where your model can be easily replicated? Take a look at your standard operating procedures (SOPs). Would someone with little knowledge of how your company works be able to implement them?
And think about your brand, too. Do you have a set marketing voice that other locations can emulate, or will you have to water it down and lose your unique style to make it appeal to a wider audience? If that sounds like it’d ruin your product or service as a whole, then it may be better to stick to a single location for now.
4. Do You Know The Rules And Regulations Around Franchising?
Starting a franchise isn’t as easy as slapping your business’s name on an empty building. Each state and region has specific laws and regulations governing how franchises can operate. Be sure to do your research before jumping in–being shut down is infinitely worse than not franchising at all.
5. Do You Have The Determination To Run A Franchise?
Even if you plan to be relatively hands-off with how you manage your brand, your franchise isn’t going to be a “set it and forget it” situation as the company founder. Starting a franchise is a total investment, from just starting out to establishing multiple franchisees. You’ll need to be ready to step in when any issues arise and keep a wary eye on your franchise owners to ensure that they’re using your brand in an approved way and actually lift up the company as a whole.
One bad apple spoils the bunch when it comes to franchises–if your franchisee gets in trouble, it reflects badly on your whole brand, and you’re the one who will have to do damage control. While the rewards are immense, you need to be determined enough to push through the struggles.
6. What Are The Financial Risks Of Starting A Franchise?
You already know that franchising your company will take a good amount of working capital, but what financial risks lay ahead if you pursue franchising opportunities? If your potential franchisee backs out, will your company be able to weather the lack of income? Take a look at all potential expenses, debts, and liabilities that come with franchising–while you may have the capital to get started, you might not have enough set aside for a rainy day as well.
7. Do You Need The Help Of A Financial Consultant?
Going into franchising is a daunting, time-consuming experience. Rather than trying to factor in all the pros and cons–and costs–yourself, you might benefit from hiring a franchise consultant like Knock Out Franchising to help you get started on your franchise journey.
With Knock Out, we’ll take a look at your business and tell you if it’s a viable option for franchising in the first place. Then, once we’ve determined that you’re a good fit, we’ll take care of promoting your franchise to interested aspiring business owners and ironing out franchising agreements, all while making sure to follow local rules and regulations and maintaining your brand’s identity.
Franchising can be a very exciting next step for businesses, but you want to be sure that you have a chance to succeed before jumping in. Take a good hard look at your business, then consider these 7 questions. If you think you’re ready after going through those steps, then it’s time to start franchising!