Deciding if your business can be franchised
While most businesses can be franchised, it is the quality and professionalism of the management that will determine success, moderate achievement or failure.
When considering expanding a business by franchising there are numerous areas to be examined. What follows are some of the more important ones.
When asked by management to evaluate their existing business, I often surprise them when my starting point is evaluating them as a team by asking them some very specific questions.
Do they have the right expertise to manage fellow business people who become their franchise owners? Can they cope with rapid expansion and ongoing infrastructure development requirements – and with success itself?
Are they prepared to contract in professional assistance to top up any shortcomings, and do they genuinely want to develop what will be a potentially demanding network of individuals who will look to them for guidance in all aspects of running their businesses?
Are they enthusiastic, genuine and confident in what they are doing – and are they the kind of people who others will feel comfortable working with?
It has been pointed out that setting up the necessary franchise support infrastructure will involve substantial expenditure and management time, as well as gearing up production or equivalent purchasing resources.
Companies will need to be financially sound at the outset and should not be relying on franchising as an emergency measure to plug existing deficits. While it is true to say that successful franchising will eventually become self-financing as the franchise network grows, the period of evolution may need further funding along the way.
Re-investment should also be looked at as vital in securing the long-term position of the franchisor company. Looking at the long-term, rather than the short-term, is vital here.
Does the company have substantial experience in their market?
As competition can be fierce, a highly focused understanding will be required to keep ahead, especially when the going gets tough. Can that edge be maintained, and is there sound ongoing market research and development supporting the overall strategy?
Franchise owners will be relying on the company to provide a lead, based on intensive market knowledge and experience, which is one of the key reasons people seek to invest in a franchise.
Supply and demand
It is one thing to be selling in your own locality, but does the product or service you are offering have wider appeal – regional, national or even international?
If product-based, can you guarantee reliable sources? Does the product have long-term appeal, and are you well positioned in the chain to ensure competitive pricing? After all, you do not want to price your franchise owners out of the market. Consider any problems that might arise regarding the product – such as legal constraints, obsolescence, supply lines etc. Equally, service-based companies need to be sure of their long-term viability, as well as having the ability to adapt to ever-changing requirements and geographical variations.
Counting the cost
An area that always concerns me greatly is the question of sufficient profit being available to share between franchisor and franchise owners in order to justify a franchising strategy.
Both parties will need a suitable return on their investment of time, money and effort, in addition to generating a realistic trading profit and future security. In the interests of everyone involved, you must get it right. Take a long, hard, honest look at your business and be sure to seek appropriate professional advice on whether you and your company are right for franchising.
By enlisting experienced Franchise Consultants, you will save yourself a great deal of time, effort and money.