Are you interested in growing your business while minimizing risk and responsibility? Franchising your business may be the solution. Referring to an arrangement in which a business affords one or more parties the right to operate using its brand and name, franchises allow the original organization to grow without expending all its resources in the process. Understanding the complexities of franchising is crucial to determining if and how to franchise your business in the years to come.
Deciding to Franchise Your Business
Not all companies are suitable for franchising. Before you consider franchising your business, it’s important that you assess your current financial standing and resources for training. As a franchisor, you have a responsibility to provide marketing support, on-the-job training and other services to franchisees. The success of your franchises depends in large part on your ability to teach and duplicate your business model to others in a short amount of time.
Along with financial resources, a successful franchisor must offer a product that is desirable to both the general public and prospective franchisees. If your goods or services are too niche or too common, you will likely have a hard time attracting buyers. Before attempting to franchise, you should assess whether your business can truly remain competitive in the marketplace in the long run.
On the other hand, if your company is financially solvent and your product is in high demand, franchising can be a great way to expand your business quickly and safely. Because franchisees pay most of the startup costs, franchising enables companies to open new branches without getting into too much debt. Additionally, franchisors can preserve their own time and resources by letting franchisees handle daily operations for the new locations. And because the franchisee is not just a store manager but also the owner of the business, he or she will be more motivated to ensure the franchise location is a success.
Steps to Franchise Your Business
If you do decide that franchising is right for you, it’s important to comply with all the necessary legal guidelines to protect your business moving forward. Here are four steps to help you franchise your business successfully:
1. Take a Good Look at Your Business Model
The first step in deciding to pursue franchising is to figure out your market potential and why your business model can or cannot succeed as a franchise. This includes figuring out if you can be more successful by owning all new locations or by giving control to someone else to own and operate them. Even if you are offering a great product or service, your franchisees may face difficulties if they don’t know how to replicate your success. You may even want to hire a company to perform third-party research to give your franchise operation its best shot at success.
2. Put It All on Paper
No matter how effective you are at running your business, your franchises are unlikely to be successful if you can’t transfer your knowledge and methods. Before franchising your business, take the time to develop a curriculum for all your operational processes, including training methods, customer service policies and marketing endeavors. By putting all your policies on paper, you can avoid missing essential steps and prevent confused franchisees from improvising “solutions” that may hurt your brand.
3. Adhere to All Legal Requirements
One of the most important steps in franchising your business is securing the necessary legal documentation. With a franchise contract, the franchisor ensures that franchisees will operate according to the contract’s standards and guidelines. For example, it may stipulate that the franchisee pays royalty fees, signs a non- compete clause or follows particular training requirements. By laying out all legal guidelines ahead of time, you can avoid serious disagreements between parties down the line.
4. Choose Franchisees Carefully
While it’s flattering to learn that entrepreneurs are interested in your business, franchisors should remember that not every candidate makes a good franchisee. Because franchisees are operating under your name, they directly impact your company’s reputation. Before offering a franchise agreement, take the time to evaluate each candidate’s skills and experience, and make sure you feel comfortable with him or her representing your brand. Looking internally and considering someone that already works for you is a good place to find potential franchisees you can trust. You can also visit the International Franchise Association website to find resources for fostering positive relationships between franchisors and franchisees.
Start the Franchising Process Today
Franchising your business can enable you to turn all your professional goals into realities without incurring additional risk and responsibilities. By taking the time to do research and choose franchisees carefully, you can give your business the best chance at succeeding.
Help Your Business Thrive
Get our Newsletter
Sign up for our newsletter to receive your free 30-day trial of QuickBooks