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How to Franchise Your Business

By: Franchise.com

 

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Do you own a successful business? Do customers frequently tell you that you should consider franchising your business?

If so, congratulations on building a business that boasts a loyal following of devotees. While customer loyalty is a hallmark of a thriving business, and franchising is one of the most effective methods for growing and expanding a business, there are several other crucial factors to evaluate in order to determine whether franchising your business is the right growth strategy to pursue.
Does Your Business Have What it Takes to Become a Franchise?
Franchises exist in a wide-range of industries, and many business models lend themselves to franchising. Therefore, practically any type of business can be franchised providing it has certain key characteristics. In order to assess the viability of franchising your business, you must take a close look at your business and objectively answer some important questions:
1. Is your business “franchise-worthy”? Franchising provides both franchisors and franchisees with significant competitive advantages. For prospective franchisees, the opportunity to launch a business with an established track record for success, that can start generating revenue in a relatively brief period of time, is one of the main draws.
So, when it comes to determining your concepts’ “franchisability,” you should first look at your business’s bottom-line. Does your business feature attractive profit margins? Has the business consistently performed well over an extended period of time? A sufficient return on investment (ROI) is essential for both you, as the franchisor, and your franchisees; therefore when assessing the operating margins, it’s vital that you account for franchise fees and royalty payments, as well as the costs associated with providing a comprehensive franchise support system.
2. Have you conducted a competitive analysis? Offering in-demand, sought-after products and services that have widespread appeal is a crucial component of success. While there can be many similar players in a market, and the adage that competition benefits consumers as well as companies holds true, it’s important not to lose sight of what your competitors are offering so you can position your business accordingly.
By performing a competitive analysis you can gain a better understanding of the direct and indirect competition that exists. Conducting a competitive analysis can also help you identify unmet demand and possible strategies for differentiating your business from the competition. Assessing your businesses’ strengths and weaknesses allows you to identify opportunities in the marketplace and respond to emerging trends and consumers’ changing needs and wants.
3. Is your business teachable? Consistency and a business model that’s easy to replicate are distinct characteristics of franchising. In order to franchise your business, you must have a concept that can be easily taught and that’s simple to execute.
Franchisees come from various professional backgrounds and may or may not, have relevant industry experience, so you must develop an effective training program. Franchisees should also be able to master your business system in a relatively short amount of time. While you can aim to recruit franchisees that possess specific skills, if the qualifications and skill requirements are too specialized and stringent, the pool of potential franchisee candidates will shrink. Casting a relatively wide net and developing an easy-to-operate business system is vital to accomplishing your franchise development goals.
4. Will your concept succeed in different markets? Since geographic expansion is typically the crux of franchise development, you must assess whether your business will translate well in various markets in order to determine whether franchising is right for your concept. Although your products and services may be highly sought-after in your community, will that same demand exist in other towns, cities, states and regions?
By identifying the elements and criteria that deem a location ideal for your business, you can develop a site selection strategy that will help you effectively expand in other geographic areas. Once you identify your primary and secondary target markets you can coordinate a franchise recruitment strategy that goes hand-in-hand with your expansion plans.
5. Do you understand your business inside and out? The businesses that are the best candidates for franchise development typically have been in existence for many years and have at least one location. The experience, knowledge and insight that you’ve gained over time will be crucial to replicating your success. Before you can grow your business through franchising you must have an in-depth understanding of every aspect of your business and be able to articulate your business’s customers, suppliers, positioning, competition, branding, seasonality and more.
Based on your business ownership experience and the competitive analysis that you performed, you must also specify the types of locations, construction requirements, design and décor, operating expenses, pricing, competitors, competitive advantages, branding, marketing, and the necessary suppliers and vendors.
6. Do you have a solid team of industry experts who can help you turn your current business into a growing franchise network? Effective franchise development and support is crucial to the long-term growth and success of a franchise system. Although you may understand your business better than anyone, you will most likely need to hire franchising industry experts who can provide essential franchising industry insights, knowledge and expertise.
In addition to strengthening your business system, assembling an experienced management team will also help you attract prospective franchisees, as franchise concepts that feature an established track record and accomplished management teams are more appealing and have increased credibility. Your franchise system should also offer franchisees benefits that they wouldn’t have access to if they were starting an original business from scratch, including training, operations manuals, onsite instruction and support, consumer marketing, product and service enhancements, and additional support systems.
You may also need to consult with franchising attorneys who can help you prepare your Franchise Disclosure Document (FDD) and other necessary franchise documents.
Is Franchising Your Business in Your Future?
If you honestly and objectively answered ‘yes’ to those questions, you may have a future franchise on your hands.
Now you can take the next step and delve deeper into the world of franchise development. If you’d like to learn more about how franchise consultants can help you franchise your business click here.
This article was originally published by Franchise.com
Published: August 5, 2013
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