Thinking of Franchising Your Business? Here's What You Need to Know

Business.com / Franchising / Last Modified: February 22, 2017

Are you thinking of franchising your small business? There's a lot of consider, so ask yourself these questions before making the leap.

Is your small business performing well? Do you want to take a big step in regards to expanding? Franchising is a definite contender if you said yes to both those questions as it can be quite beneficial to your company.

Related: 3 Common Questions About Franchise Tax Answered

Before defining what you need to consider before making a decision to franchise, first are a few advantages to franchising from the franchisor perspective.

  • Network expansions - this is through using the financial and manpower resources of the franchise.
  • The network has the ability to grow at a rapid pace.
  • The day to day operations will not be the concern of the franchisor.
  • There is no high capital risk as the Franchisors organisation is compact with the ability to earn profits.
  • The franchisor will have fewer staff and therefore few challenges that come with them.
  • The managerial duties and overall management of each outlet will be the owners responsibility, they tend to be motivated and hungry for success.
  • Provides the opportunity for wider and secure outlets for the products and services.
  • Using the widespread network of outlets the franchisor will be able to reach a National or even International level of customers.

By looking at these advantages the option of franchising can be very tempting and attractive. Although when establishing a franchise the process has to be undertaken with skill, patience and with capital: I emphasis on patience as it can take as long as 3 years to franchise your business and then a further 3-5 years for your Franchisor to see proper profits.

There is one step or factor you need to consider before even thinking of the franchise process and this is proving your business concept. Does your business have a replicable and successful business format? It is recommended that your business should have been operation for a minimum of 5 years.

Related: Expert Advice on Opening Your Own Franchise

This is because it is recorded that the average stand-alone small businesses have an 80% chance of failure in those first 5 years. This seems to be a high percentage but if you beat the odds than you have the comfort of known that your business structure is successful, viable and functional.

Franchising can be very beneficial as we have seen results from famous fast food chains such as McDonalds and Australia’s Oporto’s, numerous Retail stores and other categorized franchises. But success does not come easy.

Related: Franchise Opportunities Key Terms

Below are a few questions you will need to ask yourself and a couple of points you will need to consider so that your decision to franchise is an educated decision:

Does your business stand out? Is it replicable?

A franchise is overall a series of duplicate businesses in different locations. Therefore it is recommended that you should look at the business and its operations and make an education judgment on whether you are able to duplicate it easy or not.

Do you have a popular/successful brand?

Franchisees are majorly attracted to the franchise for one of a few particular reasons, the fact that its brand is already developed and has a following. There your brand elements should already be successful in your own business before you start trying to sell a franchise.

Are your business systems detailed and tested?

Similar to question 2#, this is detailed around what franchisees are interested in. That is the already successful and developed business structure and system. If you have flaws in your own business these will be passed on to the franchisees, therefore having a detailed and pre-tested system is recommended.

Do you have adequate capital/financial reserves?

If you think you will need a certain amount of finance to franchise your business then the figure in your head is probably a lot smaller than the amount you will need. That is why as a safeguard it is recommended that you have access to a contingency/reserve capital fund.

So far we have gone through the advantages, precautions, questions you need to ask yourself and finally the government related recommendations. This is very important information and if you would like to read into it further follow this link- franchise.org.

Government Franchise Recommendations

  • Pilot test business/franchise with company owned and operated outlets
  • Reach out for professional advice- solicitor, banker, accountant and even a franchise consultant
  • A franchise solicitor must be the person to write the franchise agreement
  • Take time to write the operations manual
  • Franchisees should be chosen carefully, don’t jump in to quick
  • Provide first class training and further support
  • Keep developing the franchise and maintain standards
  • Ensure marketing, advertising and PR are first class

Overall franchising your business can be a very successful and beneficial endeavor for your business. But consider the steps and whether this method of expansion is the right method for your specific company. Ask yourself questions, and take recommendations and advice from professionals.

Good Luck!

Chelsea Bent is an ambitious 21 year old. When she was 17 she began her own on-line jewelry business (Facebook) that flourished, it was featured on the first page of Google. After a year she closed down shop as she decided to begin her studies. She has studied Business and has implemented her knowledge into further entrepreneurial endeavours. Currently working full time at Business2Sell as their Social Media Manager, she has also developed her own Beauty and Fashion blog, ShadesofVirtue.com; this launching on the 21st of July 2014. She continues to work towards her goals and enjoys accomplishing them. Being a high spirited, ambitious and adventurous person she likes the challenge.

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