Franchising your small business can help it grow at an extraordinary rate. Plus you’ll get to see your company spread across the country, and maybe even the world. But what is franchising exactly?
Franchising is when you allow someone else to go into business using your trademarked materials, systems, and methods of operation. As a franchisor, you’ll be responsible for assisting franchisees in organization, training, marketing, merchandising, and more. In return, franchisees pay you an initial franchise fee in addition to royalty fees.
It’s not easy going down the franchising path. It requires money, organization, and a lot of help. But if you’re interested in learning more, here’s a quick guide to franchising your business.
Franchising is an expensive process, so you better have your finances in order before you get started. Ask yourself whether your business is prepared to franchise. Is it the most logical move at the current moment? Or are there other options that can help grow your business and increase revenue more effectively?
In order to start franchising, your business should meet a certain set of minimum requirements. First of all, you should be running at least one profitable location— multiple profitable locations would be even better. A business with consistent profits over a few years is more likely to be able to set up elsewhere and find success, as opposed to a new business that has just recently started to see profits.
It’s essential to do thorough research before setting up a franchise. Running a franchise is much different than running a small business and you’ll have to prepare for that.
You should do some market research to determine what locations would be most suitable for your new franchise business. This will help you gauge consumer demand and market saturation. Look closely at the competition in the area you’re thinking about expanding to and observe how they operate.
When choosing a location for a new franchise, you might first consider somewhere in the same general area as your flagship store— this way, there will already be some familiarity with your business and brand recognition that you can capitalize on. It will also make it easier for you to visit this franchise in person to make sure everything is running smoothly.
As far as choosing franchisees, be careful about who you pick. They will be representing your brand, so they should be able to competently run a business and have a character that aligns with your company’s values. It’s a good idea to run a background check and a credit check for employment to gain a better understanding of a franchisee’s character and their level of financial responsibility before signing a contract with them.
As a franchisor, you’ll be responsible for providing franchisees with a blueprint for what your company is and how it’s run. They will rely on you for a business plan, a training program, marketing materials, and more.
Many franchisors also choose to provide the franchisee with an operations manual that details business operations and company policies, so that they can refer to it throughout the course of running the franchise.
Another priority as a franchisor is coming up with a marketing plan that will help spread awareness about your brand and result in growth. You should calculate a growth strategy where you expand steadily over time— perhaps you open up a few locations in one state, then try other states across the country, and then establish yourself overseas in the future.
Given all the legal and technical complications that come with franchising a business, you might want to look into hiring a franchising consultant who understands the process, the best practices, and common strategies. Even though this is another cost in an already expensive process, it could very likely save you money in the long-term and reduce your own workload.
Hiring a lawyer who specializes in franchising is also an important step. There are many legal documents and contracts that need to be written up and reviewed throughout the process, and a lawyer can save you a lot of time and confusion by handling these for you.
If you have a successful company, strong finances, and a solid business model, then franchising can be a great way to grow and profit. It can allow you to expand brand awareness and reach a larger audience than ever before. But it isn’t an easy process, so just remember to do your due diligence, develop a plan, and get the help you need along the way.