Franchising is another excellent form of business expansion. Unlike when you branch out, where you have to invest in a new location, franchisees do all the work. They are highly motivated to perform well, fostering faster growth for a franchisor’s business.
There are about 773,603 franchise establishments in the U.S., according to the 2019 Statista data. Though franchises are possible for various establishments, it is most commonly known in the fast-food sector.
McDonald’s the country’s leading lucrative U.S.-based franchise bringing over $96 billion in sales. 7-Eleven follows with $86 billion in sales.
Franchising your business is not an easy task, though. It is tedious with lots of planning and paperwork involved. But at the end of the day, you will see that the results are rewarding. Furthermore, not all businesses are ready to franchise.
So before you go ahead, check first if your business has these tell-tale signs that it is now cut for franchising.
Signs That Your Business Is Ready to Franchise
#1 You Can Clearly Articulate Your Brand
A great business concept is important. However, when you plan on franchising your business, you should know what exactly your brand is and how to articulate your concept and plan.
Systemization is the key in franchises. There must be an organized, solid outline of every aspect of your branding and operation. It makes things easier for your franchisees.
#2 The Business Is Working
Franchising is not cheap, and no one would want to invest in a franchise opportunity that cannot turn a profit. Keep in mind that franchising is not a great way to inject some capital into your cash-poor business. You need to have at least 3 years of steady profit before thinking about franchising.
#3 You Have Enough Capital
Good cash flow is essential to get your franchise off the ground. A would-be franchisor needs sufficient capital to hire the necessary experts to make the business franchise-ready. We are talking about lawyers, accountants, franchise consultants, and branding experts.
#4 You Are Willing to Team up With Multiple Experts
Franchising your business essentially means expanding it. With so much work at hand, you cannot do it alone. You need a team of multiple experts to make this venture a success.
You need a branding expert to keep every franchisee on the same page. Lawyers and accountants can help you with legal and monetary issues. You might even have to team up with a manufacturing company to keep your plastic containers uniform if you are selling products.
#5 Your Vision of Expansion Is Realistic
Entrepreneurs are visionaries. But when you plan on franchising your products or services, you need to get real if it can be pulled off. It takes commitment when you plan on franchising your business. It might take years of preparation before it eventually pays off.
After you have gone over the tell-tale signs if your business is ready to be franchised and have answered affirmatively to each, there are some details that you also need to consider.
What You Need to Start Your Franchise Business
1. Capital to Fund
Initial capital and overall net worth are important if you plan on franchising your business. Unless you have enough cash strapped on your savings, you might consider applying for a loan. Most commercial banks offer funds for various types of franchises.
2. Franchise Disclosure Document
Taking care of legal matters is important when you are franchising your business. You do not want to end up in a legal battle. All business-related matters should be well-documented. And one of the most important franchise documents is the Franchise Disclosure Agreement (FDD).
Contained in this document are the following information:
- Information about your company
- Background and information about company officers and owners
- Previous bankruptcies and lawsuits
- Responsibilities of Franchisee and Franchisor
- Other franchise-related details.
3. Excellent Training Process
Your franchisees need to succeed if you want your franchise business to succeed as well. Plus, maintaining the quality of your service and/or product is of utmost importance for your brand.
Having a great training program teaches your new franchisee what they need to know about the day-to-day operation of the business. Placing a properly trained employee from the headquarter could help supervise how the operation is done in the new franchisee.
4. Comprehensive Franchise Operations Manual
A comprehensive franchise operation manual is essential since your goal is to ensure the same quality and brand across your franchisees. The operation manual should cover everything necessary for day-to-day operation. It covers everything from opening and closing procedures to approved vendor lists.
Transforming your business to a franchise could be the best decision you’ll make this year. Start now and make your dreams come true!