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6 Keys to Determining if Your Business Can Be Franchised

6 Keys to Determining if Your Business Can Be Franchised

If you’ve gotten to the point of exploring franchising your business, let’s take a moment and celebrate your success. You’ve worked hard to develop your company, spending long nights and weekends toiling to build something successful. That accomplishment speaks volumes to your drive and resilience in the world of business.


But is it time to franchise? Odds are you are thinking that you aren’t ready; your business isn’t perfect. You’re right. Your business isn’t perfect. Great news, it doesn’t need to be. You just have to establish it to a point that it can be replicated successfully. Just because you franchise doesn’t mean that you can’t keep growing and strengthening your brand. Whether you are there or not, that is the question. But the good news is that you can start structuring your business in a way that maybe in 6 months to a year you will be ready to pursue franchising.

Worried franchising isn’t an option for your type of business? Think it’s only for fast food chains? Think again. Franchising enables all sorts of businesses to expand. Even service based industries franchise, such as hair salons, childcare, and cleaners. Some popular examples of franchises include Supercuts, LA Fitness, The UPS Store, Super 8 Motel and Curves.

Don’t believe me? Here are other unique businesses that have successfully franchised: 1-800-Got-Junk, BedBug Chasers, K-9 Resorts, Resume Hut and Snore Pro. I am part owner in a video gaming company franchise. That’s a variety of business industries. What do they all have in common? At one point, they were all a small business. One very similar to yours.

1.) A Legacy of Success: A Profitable Business

One of the first factors potential franchisees will look at is the success of the business. Before they invest a large sum of money into owning and operating a franchise location, franchisees will want a proven record of maintainable success.

Related Article: Franchising provides an excellent platform to create consistency with the brand.

Take a deep look into your financial health of the business and become very familiar with all of the numbers. How much does operating cost eat each month? How many employees are needed at what pay rate? If you had to pay someone else to do your job, how much would that be? What is leftover each month after all expenses? Do certain months do better than others each year? How profitable s the business each month, each year?

While good information for any business to become familiar with, it is especially important for a franchise. If a franchisee is willing to invest a large sum of money into your business, they will want to know all of that information to help clarify their potential success, as well as their ROI.

2.) Developed Revenue Streams

From your perspective, have you developed all possible revenue streams? One of the great advantages of franchising is reoccurring revenue through proprietary products and 3rd party contracts, on top of the royalty fees. Proprietary products are products that you create and then sell to the franchisee, above cost, but below retail. 3rd party contracts are negotiated with your vendors and suppliers.

Let’s take the K-9 Resorts example from above. Potential proprietary products could include your own line of dog treats, puppy vitamins or special grooming shampoos. Don’t have your own products today, but planning to develop them in the future? Relabel generic versions. This gives you the option to fully develop it later. Remember, your business doesn’t need to be perfect today.

There are several different approaches to 3rd party contracts. The most common is developing an exclusive contract with your suppliers. In exchange for guaranteed business they give you rebates. Other options include guaranteeing lower rates or a line of credit for you. Either way, negotiate a deal with your supplier. Continuing our example, K-9 Resort could develop different options with the suppliers for fencing, kennels, uniforms and grooming stations.

3.) Replicating Success: A Strong Procedural Foundation

Your success needs to be easily replicated. That’s why someone purchases a franchise rather than starting their own business, they want to build on your platform of success. And they will need your handbook to do it.

Make sure that you have a strong procedural system in place. The best way to start this is by asking, “Is this something that I can teach others to do? What systems do I have in place to do that?” Before handing your business model over to someone else, you need to ensure that you have eliminated all procedural bugs.

Remember, it’s a business on training wheels. You wouldn’t want to give a toddler a toy that needed a lot of assembly and additional tools to function. Your franchise needs to be a neat package with all the easy to use tools included.

4.) Same Store, Different Location

Have you ever gone to a Subway in another city? State? Country? They look and feel exactly the same. And you know exactly what type of service and products to expect. That’s the beauty of a franchise, and why customers choose to go to a chain establishment. They know the quality, selection and service will be the same at all locations.

Especially for businesses with a storefront, you need to have an established presentation, or better known as trade dress. These factors give the familiar feeling to the customer, no matter the location. Also consider other factors that replicate the experience.

Not completely sold on your current design? The original location of a franchise many times has a different storefront. It marks the period that the original owner worked to develop that look and feel they replicated. Just for fun, look up the “original” of some of your favorite franchises.

5.) Location, Location, Location

Evaluate if your business can thrive outside of your area, region, state and maybe someday, the country. Thinking outside the country might be getting ahead of ourselves. The important thing here is determine what geographical factors might play into the success of your business.

K-9 Resort for instance might have incredible potential in larger cites, but struggle in mostly rural areas. A surfboard shop franchisee needs easy access to the ocean. Can you still have easy and affordable access to fresh fish for your Seafood Restaurant in the middle of the country?

Some businesses will have greater geographical barriers than others. Smaller franchises have great success staying within a smaller region, especially when first starting out. Before franchising, also consider if your city or region is large enough to support two of your locations. The main step is to evaluate if there is a market for your services or products in which areas, and potential geographical barriers that might arise.

6.) Start Up Costs and ROI

Purchasing a franchise is a large investment. And the expenses for the franchisee don’t stop there. Once they acquire a franchise location, they then need to open said business. Adequately preparing the franchisee for all the related startup costs is a crucial step.

The easiest way to start this is think about if you were going to open a new location. What would you need to get the business off the ground? This will include items like space rental, insurances, remodeling, supplies, equipment and products.

Once you determine the initial costs for opening the business, estimate the length of time it will take to generate revenue, break even on the initial investment, and ultimately start capitalizing on your profit making potential.


The franchising process takes place over several years, but is well worth the time investment. If you think franchising might be an option down the line, start taking action today to develop your procedural systems, test out revenue streams and research trade dress options. When it comes time to start franchising, you will be glad you did your due diligence.

To see if your business is something that can be franchised, please reach out to us today.

This article was originally published by Legal Matters LLP

Published: August 13, 2015

Source: Legal Matters LLP

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Robert Steinberger

Robert Steinberger, who often goes by Bob, is a founding partner of the Law Offices of Soden & Steinberger, LLP. He is adept at both creating the best legal structure for enterprises as well as setting the foundations for franchise owners and buyers. While Bob’s practice focuses on both business entity formation and litigation, his specialty is franchise law. As a part owner of a franchise, he brings a unique perspective to navigating the franchise landscape. His free Franchisor Workbook gives a head start on expanding a business empire.

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