A question we regularly explore on this blog is how you can build on your business’s successes, and we’ve approached that challenge from several angles. Is there more you can do to personalize your customers’ shopping experience? Can you expand your presence on social media? Should you open a second location? There are many ways you can grow your business, and this week we’re going to take a look at franchising.
If your business is booming, and you’ve already opened a successful second location, you might be wondering how to franchise a business and if the time is right to take the leap into starting a franchise. There are some major benefits you can gain from franchising. For example, a franchise business can make it easier to continue growing your brand (and revenue) by bringing in some of the best and brightest to your business. Instead of simply serving as managers or salaried employees, your franchisees will be proud owners of their individual locations. Their profit share is tied in with the success of their location, and that motivation will drive the dedication and hard work you need to build a successful franchise. In addition, the franchise fees typically paid by your franchisees can cover the capital you would need to fund growth.
However, franchising isn’t all sunshine and daisies. There are some unique risks and disadvantages you’ll have to contend with. First and foremost, your franchisees aren’t your employees, so you won’t be able to exert as much control over the performance of their locations. This means you lose most of the flexibility you’re used to as a small business owner. If you have a brilliant idea, you wouldn’t be able to just pull the trigger and run with it. You’d have to sell your franchisees on the idea and get them on board before putting it in motion.
Once you’ve considered the pros and cons of starting a franchise business, there are a few considerations about your business itself that you should think about before deciding whether franchising is in your brand’s future.
Do You Have A Clearly Defined Brand?
Take a moment and ask yourself if you can articulate what your business is, how it operates and why it’s successful. It’s one thing to understand your brand and make it successful yourself as a small business owner, but you need more than that to build a successful franchise. Is there a specific method for making your product or offering your services that makes it unique from the competition? What about the way you treat your customers? You need to be able to outline – on paper – the operations, marketing and systems that allow your brand to be as successful as it is. It’s the only way potential franchisees and investors will be able to understand your business and take what you’ve started to continue growing it on their own.
Can Others Replicate Your Success?
You may be able to clearly articulate what makes your business tick, but are you sure it can be replicated in the hands of someone else? Running a small business can take up a lot of your time, and it can be easy to take for granted just how much of your success is built on your personal touch. Whether that’s relationships you’ve built with long-standing customers or a dedication to making your product in a specific way, you might be surprised to discover your brand wouldn’t succeed in the hands of someone else. If this is the case, it may be difficult to persuade current and prospective customers that they’ll get the same experience with your franchisees as they do with you. Whatever the secret to your success – be it a special ingredient or just plain hard work – make sure it’s something your franchisees will be able to replicate in building towards success.
Can You Rely On A Solid Leadership Team?
The word “corporate” might give you shivers, but there are many things you’ll have to address as you start the franchising process, and relying on a corporate team can be the difference between success and failure. As your number of franchisees grows, you’re going to need comprehensive systems in place to ensure a cohesive brand is maintained. That includes everything from marketing and PR to training and legal support. Are you willing to delegate these kinds of management tasks to others? If not, you may want to rethink or delay your franchise plans. You’re not going to be able to do everything on your own, especially if your budding franchise business starts to boom, so you’ll need to be comfortable delegating work to consultants and, perhaps one day, a solid leadership group that becomes your franchise’s corporate team.
Do You Have Enough Capital To Get Started?
If you thought the costs and risks associated with your start-up were big, they’re multiplied significantly when you scale up to franchising. You’re going to need a robust cash flow to cover legal fees, consultants, brand development and more. Don’t forget the costs associated with courting potential franchisees. When you first opened your business’s doors, you had to put in a lot of time, effort and money into hiring employees and acquiring customers. The same principles will apply to recruiting entrepreneurs to join your franchise. Once you’re up and running, you’ll receive franchise fees and royalties from franchisee sales to fund additional growth, but until then you’ll need a reliable financial arrangement to get started. Make sure to consult a franchising advisor to identify how much you’ll need to get going.
Franchising isn’t the right route for every business, and there’s no shame in deciding against it. After all, you’ve earned great success with your start-up, and there’s nothing wrong with small business development and staying local for a while longer. However, if you think you’re ready, willing and able, then you stand to reap considerable earnings from expanding into a successful franchise.
Whether or not a franchise is in your future, there are many opportunities out there for you to grow your business.