Every small business owner dreams of turning their business into a multibillion-dollar corporation. Whatever industry your company operates in, there’s every chance it could expand and flourish in the future. Even the smallest business could turn into a company with branches or stores across the world and become a recognizable global brand.
However, this doesn’t mean it’s easy to turn a small business into a major brand overnight. One way to do this is through a sound franchise business model that will transform your company into a well-known brand with a big customer base, an effective payment system, and efficient operations.
Whether you own a restaurant, an apparel store, a coffee shop, or any other type of business, turning it into a franchise can be a huge step. So, how do you know if franchising is right for your company?
What is Franchising?
Franchising is a legal business strategy where a company sells the right to operate under its brand to an individual or another company. Once the rights are acquired and agreements are completed, this individual or company can operate a replica entity.
Typically, the franchisee pays a fee or a proportion of their earnings to the franchisor. On the other hand, the franchisee benefits from the existing customer base and name recognition of the parent brand.
The key terms to know in this business model are a franchisor, franchisee, and franchising:
- The franchisor is the company that gives people or companies the right to open new locations using the same name and business model.
- A franchisee pays the required fees for establishing a new location, as well as capital and royalties.
- Franchising is the overall process of buying the rights, starting a new location, and running a business under a franchise (brand) name. Here’s one of our posts about being a franchise owner vs an independent business owner.
When Should You Franchise Your Business?
Without question, changing your business strategy to franchising is one of the most profitable decisions you can make. However, becoming a franchisor is not an easy task. It involves lengthy and time-consuming procedures and a complex legal framework, as well as a significant financial outlay.
Additionally, just because you’re ready to franchise your company doesn’t mean there will be a ready pool of people interested in becoming franchisees. Here are a few things you should do to help you decide whether your business is ready for franchising, and key steps to take if you decide to take the plunge!
1. Evaluate the Possibility of Business’s Franchise Transformation
Before moving forward, the first and most crucial step is to sit down and consider whether your company is in the best possible position to become a franchise. Will the new business model be compelling enough for customers and buyers if a cloned entity is formed?
Two essential factors here will be brand recognition and the size of your customer base. Once you’ve figured out the answers to the questions above, you’ll know if you should continue developing your business or proceed to the next step.
2. Do you have Transferrable Processes and Systems?
Franchising is not just about selling your brand name. Franchisors also share structured processes, systems, and sometimes products, to ensure consistency across all locations.
This is not only a key selling point for franchisees but also helps you to ensure the quality of the products and services sold under your name and therefore protect your brand’s reputation. Therefore, you need to ensure you have systems in place that can be transferred to your franchisees before you embark on your franchise adventure.
3. Take a Franchise Advisor On-Board
Converting your business into a franchise involves complex legal procedures and a range of other steps. When one mistake could jeopardize the entire transfer process, it’s best to get advice from a franchise consultant. Bringing someone to the table who understands what’s required to make each phase of franchise development successful is critically important.
Apart from operational ideas, franchise consultants can use all of their knowledge to assist you to figure out what steps you’re missing, how to fix potential risks or issues, and if not the franchising is not the best move for your business, what business model would be the perfect fit.
4. Prepared for the Registration Process
Legal procedures and documentation are complicated subjects in any situation. A tiny mistake can force you to restart the procedure, or it can come back to bother you once your business is up and running.
Contacting a franchise advisor for help during this stage can be a good idea. They can assist you with all of the legal processes and help you to avoid potentially fatal errors. Having someone at your side who is already comfortable with these processes can save a lot of time and money.
5. Find Possible Franchisees
After successfully registering your firm as a franchise, the next step is to find potential franchisees. This process is similar to identifying the target market for your products, but this time you need to find potential franchisees to target. Think about the profile of your ideal franchisee, how to reach them, and how best to convince them to embark on this journey with you.
Finally, if you do decide to franchise your business, here’s a great video you should watch: