Franchises – Do you own a business that could be franchised?

Franchising allows smaller businesses to compete effectively with larger competitors. As a growth strategy, franchising gives you the chance to gain market share and increase your distribution points (number of franchise units).

Starting a franchise is one of the most exciting and yet most difficult things a person can do.

Should you jump before someone else beats you?

Before you start working towards your dream, you should consider whether your business would work better as a franchise. Not all business concepts would be good for a franchise system. Also, setting up a franchise is a long-term endeavor that involves many people as well as their hard-earned money.

You want to be a responsible franchisor, not just a franchisor. A franchisor has ethical, moral, and legal responsibilities to the prospective franchisee. You are asking people to risk what they have acquired over time. The responsibility of the franchisor in the relationship is to offer: a solid business concept and operating system; capital to grow the business; a marketing plan; a strategic plan to grow the brand; complete training and support in business management; a plan to anticipate and increase growth within a target market; and a culture that franchisees can respect.

The franchisee’s responsibility is to operate the business in accordance with the franchisor’s standards, find and work with customers, and provide capital to the franchisor in the form of initial franchise fees and ongoing royalty payments.

Build a successful franchise system and become a successful franchisor

Whether or not to franchise often depends on where your business is located at the time. Certain steps are necessary and must be implemented to protect yourself. Essentially, a franchisor needs an original business concept with a support system that builds the business. The franchisor sells deals to individuals to build the brand, and these franchisees use this system to acquire and retain customers. This seems simple enough until you consider all that is involved in the franchising way of doing business.

Some of the elements that a franchisor must have to be successful are:

• An original business concept that can be duplicated and create standard results in all franchise units.
• Broad geographic appeal.
• It has broad market appeal.
• A well-prepared business plan, possibly drawn up with the help of a franchise consultant.
• Legal documents and registration: clear legal obstacles.
• Franchisee recruitment and selection process: development of a franchisee profile.
• Identify a growing market and develop a sales plan.
• Market share: dominating a specific market is the goal of any franchisor.
• Adequate capital to develop the infrastructure of your business and run the business until it begins to generate income.
• A highly developed training and support program.
• Research and development to anticipate the needs of your client.
• Unit profitability. Make sure the savings are enough to cover your expenses, but not so high that your franchisees can’t stay in business.
• Management structure that will develop and implement strategies; be an inspiration for franchises; and satisfy investors.
• Identify franchise territories and assign franchise units.
• The relationships between suppliers and vendors create standards.
• Equipment for each unit.
• Field Support Staff: The eyes and ears that identify and resolve issues with franchisees.
• Ethical culture and decisions that franchisees can respect.
• A franchisor needs a solid business infrastructure as well as a clear concept before signing a franchise agreement with its first franchisee.

Monetary Realization

One misconception is that you make money as soon as you start franchising. Realistically, you’re lucky to break even. An adage that makes sense is that it can take 10 franchisees to become a profitable franchisor until then, you will need to use your own resources to provide support.

As you successfully expand, the real money is in the royalty stream. Royalties are calculated in two ways. The most common is a percentage of the franchisee’s gross sales (usually 5 to 10 percent), the other is a flat annual fee.

Does your business fit the definition of a franchise?

There are several reasons why you may decide to franchise your business. One reason is that you think your concept is unique; However, before you decide to clone your business and transfer your idea to someone else, you must be sure that it will work.

Franchising is a complex process. You must have put your concept on the market and overcome the problems. Is your idea something you’re selling yourself or is it something you can actually deliver?

To see if your business can fit the definition of a franchise, test it by opening additional locations of your business to build out the support system that is so integral to franchising. You will need to build a new unit, develop an operation manual, draw up agreements with suppliers and vendors, etc. This will give you a little understanding of what it means to be a franchisor. If your business simply cannot support another unit, you should not become a franchise system.

Franchising is much more than having a good idea!

Asking for help is not a sign of weakness, it is a sign of strength. Instead of thinking that seeking advice is a sign of weakness, see it as a sign of growth and maturity. Expert advice can help you build your business if you approach it wisely.

Franchise support services are an important component of the success of both franchisors and franchisees. Look for these experts who specialize and focus their business in the franchise industry. Find professional help to guide you on your journey through the exciting world of franchising.

Franchising is much more than having a good idea!