A great way to realize business growth while at the same time minimizing the costs associated with expanding into additional locations going it alone is through franchising. When you franchise your small business, you are – in essence – lending your business model, brand name, and operation strategies to another entrepreneur in exchange for an initial franchise fee and ongoing royalty fees (paid to you). And while the process of franchising your business can prove challenging at times, it can be as equally financially rewarding.
How do you know if you’re ready to turn your business into a franchise? Follow the steps below to find out!
- Evaluate whether or not your small business is ready for franchising by looking at the sales records and profitability of your existing location.
- Consider whether or not your concept has appeal to your customers as well as to prospective franchisees. Is your product or service familiar, unique, run-of-the-mill? Will adding additional locations increase profits or drain resources? Does your concept provide good returns on an economies of scale?
- Take a look at your finances and make sure that more than one unit beyond your first location is profitable.
- Do your market research. Look into whether or not there’s widespread enough consumer demand that reaches further than just your home city.
Read more on Why its Important to make a Competitor Analysis
Ready to get started? Here are a few tips on how to turn your business into a franchise.
- Get organized! As a franchisor, you will need to be able to provide precise details about your small business’ business model, brand name, and operation strategies – basically everything from top to bottom, operations management to business card designs. Use this time to develop an operations manual that will give prospective franchisees a quick reference look at policies, best practices, and approval processes.
- Get in touch with an attorney. You’ll need a professional’s advice on crafting a Franchise Disclosure Document (FDD), which has a very rigid format and includes information like pricing, intellectual property protection, and the franchise agreement.
- Offer your franchisees support – remember, when they succeed, you succeed! Support comes in many shapes and sizes and could mean meeting in person or spending face time on Skype or chatting on the phone. Make sure you help celebrate their wins and their milestones as well as offer constructive criticism during their losses.