If you’re considering to franchise your successful business, then there are a few details to understand before advertising it as a successful, money making opportunity. First, franchise opportunities and choices are vast in category and products. From coffee shops to ice cream parlors. There are many franchise shows throughout the year including the Franchise Expos, where people can experience first hand many franchise business offerings.
Understand Franchising:
Understand, just because a franchise is being offered, doesn’t suggest it is a proven concept and well planned business model. In many cases, business operators have the desire to franchise their business simply because they have the idea it will bring in tons of income from the franchisee.
Over the last 7 years of being in the consulting business, I’ve probably talked more people out of idea to franchise their business than in support of it. Why, two primary reasons. Lack of funding to properly launch and support the concept and second, little proof that the concept can actually be profitable and work after several locations are in operation.
If you are looking to franchise your business and believe the people investing in it can operate on their own with little support, then you’re sorely misinformed and open yourself up to a potential lawsuit. Making and selling a claim without substantiating and proving the concept with P&L history, is very dangerous and makes for a short term business endeavor.
Better Business Bureau:
Here is an article written by the Better Business Bureau (BBB) on buying a franchise and buyer beware. If you plan a franchise from the start, then you won’t be part of a fraud list, here’s an article from Entrepreneur magazine on buyer beware when considering a franchise..
Franchise or License Your Business:
It would also be helpful to understand the difference between a license agreement and a franchise, the requirements can vary depending on the state in which the business resides.
- A license agreement is paying a one time annual fee under a specific amount for the right to use a name. The licensee can typically have more latitude to operate their business compared to a franchise.
- A franchise can include a entry fee plus royalty. The royalty can be a percentage of weekly or monthly sales. Paying ongoing fees to the franchise is to have support and guidance on site location approval, signage, products made and served, menu item names and selection, ongoing training and regional or national advertising.
Do you believe your business concept is ready to franchise? Many operators do, and think it’s as simple as putting together a franchise agreement, even if the model hasn’t been tested. To be a successful franchise, offering support to the franchisee is one of the most important factors for success.
Be clear and understand the business you want to get into. Here are some questions to know and ready to address.
- What is a unique aspect of your business to make it very desirable to franchise?
- What tasks are set in place, prior to advertising the concept?
- Do you need a franchise agreement tailored for your business concept or will a “boilerplate” agreement suffice?
- What are the franchisee’s expectations when buying into your business?
- What are the business model’s metric based on, to demonstrate a ROI and sustainable long term business?
- Will the franchise make, sell and deliver products to each franchise location?
- Will ongoing training and new menu ideas be sent out on a regular basis?
Many operators believe that simply because their business is busy, it could make for a successful franchise. Not so, unless it’s very unique, one of a kind and no one else is doing it. Most business concepts are a variation of an existing theme and concept, so for additional locations to be successful, basic principles need apply.
What are some of the basic principles?
- Product consistency & supply reliability
- Every sale represents a consistent gross margin
- Excellent customer service with ongoing employee training
- A space that is welcoming, clean and reflects the business and products being sold
- Convenient location with adequate parking or safe walking
What are some of the items to have in place, prior to advertising and launching a franchise?
- Create a business LLC
- Have business plan and realistic income and expense report
- Have a franchise agreement specific to your business
- Establish a theme, logo, social media presence and website
- The main location needs to have a proven sales record with two years of continued growth
- Subsequent locations will be a clone of the proven one
- Have full time trained staff in place
- Identify what the franchisee is required to do and what they can do on their own
- Establish a supplier network for signage, equipment, design, products, ingredients and carpenter
- Create “How To” manuals to make and present products, proper sanitation and open and close procedures
The best advice I offer clients that believe they’re ready to franchise, is to make sure they clearly understand every aspect of the business. Lastly, be sure that subsequent locations can be as successful as as the first and by a person that has never operated a business before. It may turn out that licensing is a better option than franchising.
Schedule a meeting with Darryl today, he’ll work with you and see if your successful business is ready to franchise.
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