How To Choose The Right Model When Starting Your Own Franchise
Starting or buying a franchise is one of the very best ways to leverage the profitability of a tried and tested business model.
However, before you look at how to start your own franchise by converting an existing business, you need to ask yourself whether it’s actually suited to the franchise model at all, as not all businesses are.
And even if yours is, there are many different franchise options to look at. What may work well for a fast food concern may not be the right approach for a garden maintenance service like Jim’s Mowing.
So here are ten test questions I often ask would-be franchisors:
One. Does your business have proven cash flow and profitability? If it’s a new idea, it won’t of course, but if it’s established, then strong positive numbers will give your franchise model credibility.
Two. Are you 100% committed to building a larger business? Building a franchise is hard work, especially during the transition stage when you also have to run your existing business.
Three. Is your business at a crossroads? Are you having to ask yourself whether to keep going as an independent and invest accordingly, find investors or partners, or adopt one of the possible franchise options open to you?
Watch As Brian Keen Illustrates An Example Of Using The Right System To Grow A Business Using A Franchising Model!
Four. Have you had any enquiries from people wanting to franchise your business, or go in to partnership with you? If so, you must be doing something right that potential franchisees would be interested in. In reality however, the only real indicator of interest in your possible franchise model will come from effective market research.
Five. Is there a proven demand for your product? If your business is up and running you’ll already know this, otherwise good market research should provide the answer.
Six. Could you teach your franchise model to others easily? The more you can reduce your business to a simple formula, the more suited it is to franchising. Most businesses can meet this requirement, though some may require particular skills or qualifications to make work.
Seven. Does your existing business generate sufficient profit? If it doesn’t, your franchisees won’t be able to recover their initial investment quickly enough. Ultimately, while franchises may be good at cutting overheads and getting bulk buying discounts, they won’t be attractive to franchisees if there’s little trading profit in them.
Eight. Is the right management in place? If you don’t have the skills to grow the business, or have sufficient understanding of its operations and systems, your business may not be ready for franchising.
Nine. Can you look after franchisees properly? Failure to do this is one of the main reasons why franchisor groups fail to achieve their full potential. You need to provide excellent initial training, followed by good quality ongoing support. You may be the person who fills this role initially, or you may have someone in your team who is better suited.
Ten. Do you have the necessary capital to develop your franchise system professionally? If you have already done research into how to start your own franchise, you will probably be aware of the costs that consultants typically quote to set up – generally $50,000 to $120,000, with a further $15,000 to $30,000 for legal agreements.
You can of course avoid many of these costs by undertaking the whole franchising exercise yourself, though in my experience that’s rarely successful, as there are so many areas where new franchisors can unwittingly make mistakes.
That’s why after 30 years in the franchise industry, first as a franchisee, then as a franchisor and now as advisor to dozens of businesses, I’ve developed a seven step systemised approach that has already helped dozens of business ownersachieve franchise success, substantiallyincreasing their profits while working fewer hours.