Do you own a business and dream of franchising it one day? Franchising can be one of the fastest and least capital intensive ways to expand a business, but it's not without its challenges. Many businesses have collapsed in financial ruin and destroyed their reputation by franchising their business before they were ready.
When franchising, you are using someone else's capital and commitment to open expand. These new “franchisees” do not have your experience or expertise and need you to teach them how to be successful business owners. You basically need to take everything you do to run your business and all of your experience and teach others to be as successful as you are. That's a tall order that requires a lot of planning, training and commitment.
Franchising also involves many legal challenges as well, which we won't be discussing here. Here we will be focusing on the business challenges involved in getting ready to franchise your business.
If you dream of franchising your business one day, you need to make sure you are prepared before you start. Below are some important things that you need to have in place before you decide to start franchising.
Create a Flagship Location That Proves The Model Works
You wouldn't believe how many franchises get launched today without being able to show a single profitable location. Some franchise concepts launch without ever creating a location, just selling an idea. If you want to build a long-lasting, successful franchise system, you need to be able to know the business model works. If you as the founder of the business can't make it profitable, what makes you think strangers will?
A flagship location (most likely the founder's own location) allows you to develop your business model, learn from mistakes and to refine your processes. It is here where you create your systems, fine tune your marketing and figure out what your customers really want.
Having a proven flagship location also makes it much easier to sell your franchise concept to would-be franchisees as you don't have to explain how it works, you can show them.
Most likely you have been running your own business for a few years and have a good idea what your business model is. But are you profitable? And if so, how profitable? You have to remember that with a new franchisee, they will not have the same expertise you have and will also be paying an ongoing royalty fee to you (that's how you make your money), so you need to account for these things when looking at your franchise model.
If your business depends on you, you don’t own a business—you have a job. And it’s the worst job in the world because you’re working for a lunatic!”
― Michael E. Gerber,
Create and Document Processes For Everything In Your Business
The majority of small businesses rely on the owner of the business for everything. They are the ones with all of the knowledge, expertise and experience to run the business. Employees look to them for guidance and to make decisions. Do you see why this is not scalable and why most business owners experience burn out within a few years of starting their business?
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If you ever hope to franchise your business one day, a written operations manual is a must. Written documentation on how you run the business is the only way others will be able to run a successful franchise location since you won't be there to tell them what to do and to answer their questions.
For a franchise, you will need a very detailed and thorough operations manual that answers every question a franchisee might have about the business, from daily operations to marketing to finance. You need to show franchisees how to hire and train people, how to clean the facility, how to order supplies…..basically every single thing you do to run your business each day. All of this needs to be written down and organized into a comprehensive operations manual that will become their bible when starting and running their business.
Most modern franchise operations manuals are housed online and include interactive media like video and audio files.
Create a Marketing Plan That Others Can Replicate
Creating customers and sales are the lifeblood of any business. Without a repeatable way to generate new customers, your business will soon wither and die. Marketing is what attracts these potential customers to your business.
If you are going to franchise your business, you need to create a marketing plan that anyone can execute, is scalable and is repeatable. Somebody buys into a franchise system so they can hit the ground running and in order to do that, they need an excellent marketing plan to generate sales right off the bat. When it comes to marketing, your job as a franchisor is to show them how they can generate customers and sales on demand.
Look at your current marketing plan, are you a one trick pony? Do you rely too heavily on a single marketing source for your business? Worse, are you relying on contacts and relationships that took years to establish to generate the bulk of your business? Your marketing mix needs to be comprised of a range of marketing activities, some paid and some free. But the important thing is that franchisees need to be able to replicate it.
When a franchisee evaluates your business opportunity, they will want to see how successful your marketing is and need to feel confident that they can replicate your success.
Create a Training System For New Franchisees
Most people who buy a franchise have little prior business experience. They buy into a franchise system to get the support and training they need to succeed inside a business model that has been proven to work. There will be lots of hand holding, training, and communications required in order to get a new franchisee ready to start their own business.
Poor training and support can lead to disaster for a franchise. The basic concept for a franchise is to have each and every location look and feel the same. The food should taste the same, the service should be the same and the branding should be the same. Whether you like McDonald's or not, if you eat a burger in California or in Kentucky, it will taste the same. You can only do that with high-quality training and support.
Initial and ongoing training is essential if you want to each of your franchised locations to look, act and perform similarly to your own business. The good news is that you can use technology to deliver most of your training. Webinars, video chat, email and video are all great ways to communicate and train franchisees remotely.
Create a Plan For Growth
As you add franchise locations, you will need to scale the support for them. Your growth strategy needs to be in place before you grow, not as a reaction to growth. You will need to make sure you have the appropriate support staff, training resources, and finances in order to ensure your growth doesn't become a problem.
What resources will you need to have in place to service 5 franchise locations? What about 10 or 20? While you don't have to start making these investments now, you do need to think about how you can add them quickly and efficiently when the time comes.
Are you ready to start franchising?
Franchising your business can be a fast way to grow without having to make large capital investments in your business. But it also means that you need to be much better at training, communication, and marketing as you won't be directly involved in the running of each location.
Take your time and make sure you have your own efficient, profitable business going before you look to start franchising.