Is Your Small Business Ready for a Franchise?

Should You Franchise Your Business?

Should You Franchise Your Business?

Is it time to scale up your business’ success? Perhaps you’ve been thinking it’s time to extend your network and establish a franchise. Franchises are much more likely to succeed than a traditional start-up business, but as with any new business venture, there’s still the risk of failure. Most franchises fail because they’re unprepared to cope with the challenges of a new market, so how do you know if your own business is ready? Here are four signs that your business is ready to franchise.

Do You Have the Funds?

Before you sign any agreements, make sure you understand the true cost of opening your franchise. Obviously, your first business should be turning a healthy profit before you consider expanding your business footprint. Account for the cost of brand development, possible legal fees and compensation as well as obvious overheads, such as rent, wages, and insurance. You need to have a sufficient working capital and strong enough cash flow to support your original business and the franchise, so calculate your ongoing expenses for the next six to twelve months. Will you be able to cover all your expenses, particularly if something were to go wrong?

Will Your Business Work in Someone Else’s Hands?

Remember, after the initial start-up is completed, you can’t be as hands-on as you were with the initial business. Are your business’ products and services strong enough to sell themselves without your personal touch? Have you implemented systems and processes for sales, product ordering, and dealing with the public that can be replicated? Customer service can make or break a business, so make sure your franchise staff, particularly your manager, is all well-trained, professional, and able to work under pressure. 

Is there a market for your business?

Before you make any movements towards establishing a franchise, stand back and take a look at your business. Will it work in another town, district or state? Do you have a niche service or product, or does it have a broad customer base? Try to conduct some market research on the neighborhood you want to expand into. Are there any businesses that would be competing with yours? Will you have sufficient demand? For example, a dog-grooming business is not likely to succeed in a neighborhood with low pet ownership rates, nor would a garage in an inner-city district where most of the residents used public transport.  

Are you willing to work with others?

Learning how to build a franchise requires professional advice and services of other experts. A franchise is about developing a brand as much as business, which means input from specialists in marketing, logistics, public relations, graphic design, law and human resources. There will be challenges that you didn’t anticipate, so don’t expect to do it all alone. Be prepared, both financially and emotionally, to bring others on board to help develop your business model, marketing strategy, and long-term goals to ensure that both your initial business and your new franchise will be a success.

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