Do you want to franchise your business? Not sure how to start? Start here with these basic questions. It is not rocket science but so many budding franchisors make the same mistakes so in this series of franchise basics we will explore the basic do’s and don’ts of franchising start up. Hope you find them helpful
Questions to Answer First!
Franchising can be a great way to grow your business, lucrative if done well and can be costly if not. There are a number of questions you need to answer before you start to franchise your business. I have listed a few of the basics to get you started.
Do I have a profitable business?
Look at the profitability of your business. Do you have a “solid” business? Sounds very basic but it really is the first step. For example, if you run a home based business do you make enough to earn a reasonable amount for the hours you put in and cover your costs. Or if it is a retail/store front business, you make enough to pay yourself, all the bills, rent, staff, goods, insurance etc. If it is a mobile business you cover the cost of running a vehicle, insurance etc. and pay yourself. You get the picture right? It is not a good idea (and not very ethical) to sell a business to someone if you don’t make money yourself.
Have a reality check – would you want someone to sell you a product/service that may or may not work? I have seen franchisors start selling franchises before they have worked out the financials and it can end in a huge mess for all concerned. Just for the record, if you are not making money from your business and you really believe it could be a great business – get a business coach or franchise consultant to help you. With a bit of expert help and a few “tweaks” sometimes things can be easily fixed!
Do I really have a market for my products or service?
This is important. A rather basic example, you have a video store that makes money in an area where (there is a time warp) people still rent videos. Do you think that you could sell a business like yours anywhere else? Probably not! So the answer is research! Do you have competitors? What are they doing? How many are there? What are their prices compared to yours? Now I am not advocating matching or undercutting the competitors but you do need to know what they are selling comparable product/service for. Make sure there is room in the market for you and your potential franchisees. If you can’t do this yourself, get a geodemographic study done.
Conventional wisdom is solid long term businesses can find it easier to attract franchisees. However, you can have a “fad” franchise, you don’t have to have a product or service that will last forever but you do have to have something that will be sustainable (for at least the term of the franchise agreement) and hopefully with room for growth. The last comment will earn me howls of discontent from my peers – old school thinking is you have to be around forever to be a successful franchise, with the changing times that may not necessarily be a prerequisite – moving fast on your feet and an entrepreneurial spirit may be what is required now.
Would someone else be able to run my business?
Do you have a business that someone else could step into – with training of course. Would it be simple for them to pick up the idea and run with it? Is your business based on your personality? For example, you have a fabulous café in a town in which you grew up and where everyone knows you. Could someone else step into your business and have the same or similar results? Unlikely! Your franchisee will have to have the ability to make money based on your systems and processes – so, could they? Be honest, if they can, great, if they can’t, what could you put in place that would make it work?
Have a long look at the systems and processes you have in place. How do you do things? Could you show someone everything that needs to be done to run your business? Could this be done in a reasonable time? The key is to streamline everything so it is easy to learn, easy to remember and documented. This applies to every franchise system no matter the size or type. If you don’t know how to put the systems and processes in place get expert help. Sometime it is quicker and easier to get a franchise consultant, business coach or HR expert to do it.
You can franchise just about anything – if you do it properly! Build on a solid foundation. It can be a lot easier and more cost effective to set up properly before you start franchising your business than getting help fixing mistakes.
About the Author: Sara Howell is a no nonsense, straight talking Franchise Consultant & Small Business Specialist at Business Bubble. If you have any questions or just need help – call 1300 293 239.