//Should I Franchise My Business?

Should I Franchise My Business?

In my over three decades as a franchise consultant, I am often asked “Should I franchise my business?” What makes a business “franchiseable?”

Should I franchise my business?

The Checklist To Franchise My Business

Some or all of the following questions may apply when you are making this decision:

  • If I franchise my business, can the franchisee expect to make a reasonable return on his or her investment in the franchise?
  • How much direct competition will my franchisees face in the marketplace?
  • If I franchise my business, can my concept be duplicated?
  • If I franchise my business, how much direct competition exists in terms of selling franchises?
  • Can I offer my franchisees competitive advantages?
  • Can I train the franchisees and their employees to operate the business in a reasonable amount of time?
  • If I franchise my business, is there growth potential for my industry?
  • Do I have enough trained personnel to help me implement my initial franchise strategy?
  • If I franchise my business, have I been in operation long enough to prove my concept is viable?
  • If I franchise my business, will my franchisees be required to have any special licenses or advanced degrees to operate the business?
  • How challenging will it be for franchisees to find affordable franchise sites?
  • How large a territory and what type of territory are necessary to support one of my franchises?
  • Will my franchisees be dependent upon one or two vendors? If so, does this reliance make my franchise vulnerable?
  • How complicated will it be for a franchisee to open a new location?
  • What is the long-term viability of my concept?
  • What is the likelihood that I can add additional products or services, making my franchisees even more profitable?

Is Franchising the Ideal Form of Business Expansion?

Well, yes and no.  Business expansion for many business owners often means one ideal direction, franchising.  Investment is a big part of this decision for future locations because franchisees are responsible for the investment involved with opening locations generally.  This means that franchisors can grow faster than they might by funding expansion all on their own.

With that said, all businesses are not ideal for the franchise model.  Therefore, a comprehensive, upfront analysis of your business with franchise consultants is recommended.  You may consider the following talking points during this initial session.

Franchise My BusinessFirst off, is your business model proven?  Most businesses will explore expanding once they have a gut feel that business is good and could be just as solid in other locations.  However, there are practical considerations such as operating prototype that can ultimately be replicated predictably.

Also, can you sell your franchise concept?  Is the business ‘credible’ for instance, is it ‘unique’ enough to attract interest?  Also, can you clone the business in such a way that the franchisee doesn’t necessarily have to work the 80 hour plus weeks that the founder may have for initial success in the founding location.

The franchisee is going to want a solid return on investment after royalty considerations.  Not only is the franchisee looking for a return on the time spent operating the business, but in the money spent on establishing the location.

Will you, as a franchisor, provide value to your team of franchisees?  A large part of that successfully growing team is the ability to maintain multiple relationships with state-of-the-art training programs and frequent franchisee interaction.

Do YOU have capital to franchise?  Franchising is certainly not a low cost means of growing.  There are legal documents, training programs, operating manuals, marketing materials and of course, a marketing budget to generate leads.

National Franchise Associates has the experience to help businesses franchise.  Just watch and listen to some of our client case studies and video testimonials.  We can HELP YOU and it doesn’t cost anything to call and talk to us! 

So, if you are still asking the “should I franchise my business” question over and over with no clear direction, give us a call at (706) 356-5637, or contact us through our online form.  We look forward to helping you take your business to the next level and beyond.

Google Trends: “How To Franchise”

If you are one of many successful business owners pondering the common question about franchising your business, you are in good company.  Below is a snapshot of Google Trends going back to early 2004 through 2019 for the search phrase “How To Franchise.”  Business owners searching for information about franchising their businesses are sending a signal.  The volume for this search phrase has more than doubled in the past 15 years.  It’s clear that franchising your business has many positives worth exploring!

How To Franchise Search on Google Trends

Common FAQs When Franchising Your Business

Is owning a franchise profitable?2019-09-20T12:49:08-05:00

When properly operated, a franchisor can be very profitable. The majority of NFA’s clients more than cover their initial investment in developing their franchise programs with the initial franchise fee and first year of royalties from their first franchise sale.

There are a number of potential income streams for a franchisor, including some or all of the following:

  • Initial franchise fee
  • Royalty or service fees
  • Sales of products or equipment to franchisees
  • Providing on-going services for a fee to franchisees
  • Possible financing programs
  • Revenues from site development/real estate deals
  • Area Development Agreements

For most franchisors, the royalty is the prime source of income, at least for the first few years.

Here’s an example: Let’s say your average franchise location has gross sales of $750,000 per year and a royalty of 5%. The annual royalty per franchise location is $37,500. This $37,500 per location per year is largely profit.

What are the disadvantages of a franchise business?2019-09-20T12:47:15-05:00

As with everything in life, franchising is not perfect. With careful planning, these potential negatives can be minimized:

  • Less Direct Control: Your franchisees are independent business owners, not employees. You cannot fire a franchisee or his/her employees. You can exert control over a franchise operation through well-drafted franchise legal documents, Operations Manuals and field support staff, but often, you must convince a franchisee it is in his/her best interest to follow your system.
  • More Challenging to Introduce Innovations: If you own your own locations, you can more easily implement changes and updates. Particularly if it involves an investment, you may have to negotiate with some of your franchisees to get them to implement new products or systems.
  • Potentially Less Cooperation: It may be more difficult to get franchisees to cooperate with each other than it is to get employees to work together.
When should you franchise your business?2019-09-20T12:00:29-05:00

There is no single right answer to this question. At National Franchise Associates, we generally recommend that a company should be in business at least a year before it develops a franchise program. However, there are exceptions to this general rule. One of these exceptions may be for relatively new industries that have extremely strong demand (the current interest in CBD products is a good example). Most of our clients come to us to explore franchising their businesses because they (1) feel comfortable enough in their concept and operational expertise that they want to expand; and/or (2) have been approached by one or more people who are interested in purchasing a franchise of their business.

When you contact NFA to explore the viability of franchising your business, one of the first steps we undertake is to analyze whether your company is ready to franchise. This analysis is based on issues of profitability, demand, viability, teachability, growth potential, practicality, your goals and other issues.

How do I find franchisees for my business?2019-09-20T11:35:33-05:00

As with any marketing program, the answer to how to find qualified prospects depends upon your target franchisee. What experience, financial resources, background, character, certifications and other attributes should your franchisees possess? Where do you want to sell franchises? Are you looking for owner/operators or multi-unit franchisees? Once you decide who you are trying to reach and where they are located, you can determine the most effective marketing methods to attract them. Some of these methods could include:

  • A good website
  • Online marketing, including some or all of the following: SEO, SEM, email blasts, blogs, web presentations, webinars, texting, podcasts and mobile apps
  • Referrals from friends, family, customers, existing franchisees, vendors and others
  • Social media marketing
  • Traditional print advertising in newspapers or magazines
  • Marketing through trade publications, trade organizations or trade events
  • Marketing messages in existing locations and marketing materials
  • Public relations campaigns
  • Quality franchise shows
  • Seminars in targeted cities
  • Radio advertising

There are also franchise brokers and franchise sales websites that can help you find qualified prospects.

How long does it take to franchise a business?2019-09-20T11:29:30-05:00

For National Franchise Associates, it typically takes about four to six months to complete a franchise development program. We like to offer flexibility In this area by meeting our clients’ timeframe and needs. Some business owners may want to franchise as quickly as possible, because they have strong prospects wanting to purchase franchises. Others may want to proceed at a more deliberate pace, since they have limited time to devote to the process of franchising their businesses due to other responsibilities. Some franchisors want to launch their franchise programs by a certain date, perhaps to take advantage of a seasonal spike in demand. When you franchise your business, NFA can complete your program in a few months, six months or even longer, depending upon your goals and time constraints.

How much does it cost to franchise a business?2019-09-20T11:29:36-05:00

The answer to this question can vary widely.  Some of our competitors charge over $100,000 to develop a franchise program.  National Franchise Associate’s fees are a fraction of this amount.  Our fees are based upon the services you need.

Why should a business franchise?2019-09-20T12:41:10-05:00

When a person buys a franchise, he or she is purchasing someone else’s “system”, trade name and learning curve. In return, the franchisor receives money, normally both an initial franchise fee and weekly or monthly royalties. In its purest form, franchising has been called the classic win-win situation. Both the franchisor and the franchisee succeed.

The benefits of franchising to the franchisor include:

  • Profit Potential: Franchisors often generate substantial profits from their franchise operations, including the initial franchise fee and on-going royalties or service fees. Other potential profit centers include the sale of products or equipment to franchisees, providing services (for a fee) to franchisees, sales of international licensing rights, leasing real estate and/or developing financing programs.
  • Fewer Managerial Problems: Franchising creates the most motivated managers in the world – franchisees who have invested their money and time into their own futures.
  • More Rapid Expansion: Few companies have the strength necessary to penetrate and dominate a new market quickly. A franchisor can develop new areas using the financial and managerial resources of its franchisees, rather than investing its own money, time, personnel and energies.
  • Lower Capital Expenditures: The expense of expanding a business can be overwhelming. By selling a franchise to a motivated owner, the franchisor eliminates almost all of the costs normally associated with opening new locations.
  • Lower On-Going Expenses: The fixed and variable expenses involved in running a franchise company are much lower than operating a similar number of company-owned facilities.
  • Marketing Advantages: As local, regional and national campaigns take effect, all locations benefit, including company-owned units.
  • Economies of Scale: The more locations a company has, the more buying power it commands. Plus, desired sites are easier to acquire.
  • Area Development Agreements: Franchise companies can grow even more quickly through Area Development Agreements, selling the rights to an entity to develop multiple franchise locations within a defined geographic area.

For these and other reasons, thousands of U.S. companies have chosen to grow their operations through franchising.

How can NFA help you franchise your business?

By |2019-09-20T13:49:03-05:00September 20th, 2019|Franchise Planning|