Be the Next Big Franchisor

Are you and your business ready to go franchising? Four things to consider.


Be the Next Big Franchisor

You’re running a successful business and are considering ways of expanding. But you don’t want to share control or risk the personality conflicts that come with bringing in investors.

So what do you do? You can consider franchising your concept. Here are the four main qualifiers and considerations you need to think about.

Will I make a good franchisor?

You might be a fantastic business person, but do you have the traits to cut it as a franchisor? These jobs are very different: Remember, as a business person you’re there to sell products or services. As a franchisor you will be an educator, trainer, psychologist, minister, and perpetual hand-holder to your franchisees.

You will be a fee collector, extracting an initial fee, and then following up on monthly royalties for the life of the franchise. You must also remember to allow your franchisees the flexibility to manage their own businesses and not treat them as employees.  To make this happen, carefully set the guidelines in the Franchise Agreement, Disclosure Document and all communication to the franchisees.

Is there a local market?

Don’t ever consider franchising your business unless you have a known, local market for your product or service. Marketability is determined by need, and need is determined by competition.

If you have a unique concept, it’s possible to work around your competition, but demand is as crucial as uniqueness. Your product or service must be desired by not only the people who wish to buy franchises from you, but also by the people who will buy products or services from the franchisees.

If your product is relatively new, determine whether it will sell based on the needs of your present customers. If your offering isn’t new, get a market research firm to prepare a report on the types of consumers in various regions.

Do I have the rights in the bag?

Your current branding and marketing might work for a small scale operation, but is it ready for the big league? Is your product trademarked? Apply for a registered mark as soon as possible, before the first Franchise Agreement is negotiated and signed. Make sure that no other entity has already secured the registered rights.

Do I have my numbers right?

Converting to a franchise model can be costly, mainly for the reasons of requiring experts to draft your Franchise Agreement, create solid operations manuals, and up-scale your marketing.

Before you launch your franchising plan, prepare a thorough business plan so you can look at the financial outlay each new outlet will require to get up and running, then compare that with the revenue you expect to receive from fees, royalties, and sales. Include costs that are specific to franchising, such as overhead costs, trainers, sales staff, advertising, travelling, franchise expos, brochures, and a healthy allowance forstart-up and ongoing legal, accounting, and advertising fees.

CAUTION : Be overly conservative on the timing and income you expect from your franchise outlets. Pad your expectations of when revenue will flow back to you instead of basing your predictions on how your business worked in the past.

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