Most of the time, success doesn’t come the first time around. You have to work hard for it and sometimes this means going through the tough times first. This means enduring mistakes, bad judgment and failures. I suppose a bit of luck also helps.
Like all true entrepreneurs, I’ve been through the ups and downs, have experienced hardships and times in business that haven’t been so fruitful. But it’s these lessons that have enabled me to move on in my career, using my knowledge and personal experiences as motivation to reach higher, and go on to bigger and better things.
Over the course of my business interactions, one of the biggest lessons I’ve learnt is that being entrepreneurial is one thing, but being a successful franchisor is a whole new ball game. Having a business in a single market is hard enough, but when you add in plans to expand, while you may increase your chance of profits, you significantly increase your risks. It’s crucial that you get it right.
While many people initially think that franchising is an easy option to fast growth, they could not be more wrong. There are so many things to consider before taking the plunge. Here are some things I suggest you think about before considering taking your business to a franchise concept.
1. Does it sizzle?
When you think about franchising your business, you must first be confident that you have a proven business model; that the current operation is sustainable and that it can be easily replicated.
First things first. Take the time to ask yourself some key questions, such as ‘am I seeing a good profit?’, ‘do I have ongoing demand?’, ‘is my brand well known and respected?’ and ‘can others copy what I have done’.
Does your business have that sizzle or spark to set it apart? Do you have that x factor that will continue to draw people in, even in a new environment and even if it’s managed by another? If it’s different, exciting or fun, your business is more likely to stand out; both to consumers as well as potential franchisees.
2. The nitty gritty stuff
Thinking about numbers and legal terms can no doubt be boring (and even intimidating), especially when you are in the midst of the excitement and dream of expanding your business. You will only make your life harder by neglecting this information, so by considering these things up front you will be in a far better position to grow a stronger business model.
Look closely at the federal requirements for a franchise and as you go through the finer details you will also be able to lock down the crucial aspects of your business model; such as the franchise fees, royalty arrangements, the size of the territory allocated and marketing budgets. Make sure you have a clear path, it’s too hard to embark on a journey if you don’t have a suitable destination in mind. The same goes for expanding via franchising.
I highly recommend that you bring in the professionals. They are the experts and will ensure you haven’t overlooked anything. By being satisfied that you’re being advised by those who know the industry inside-out, it will allow you to put your energy into the things you’re most passionate about – the stuff you do best.
3. People capital
Good people will always be your biggest asset. So when you are looking to become a franchisor, you can’t underestimate the power of a reliable team that can continue to grow your existing business – effectively.
Depending on how quickly you expand, it’s also likely that you will need to take on staff specifically to help manage franchisees. Franchisees need support, guidance and training. If you can surround yourself with an A-grade team, you will have the confidence and ability to grow.
4. The hard sell
You’ve answered all the questions; you have your model sorted and your key staff in place. You’re ready to take your idea to market – the only thing now is to find yourself some franchisees.
There are many ways to entice franchisees to your business; however none will be more impressive than the strong reputation you have already built for your company. When people know and love your brand, they will talk about it and in turn, promote it for you.
It’s important to note that by purchasing a franchise, you’re offering people a new career opportunity, to be their own boss and the chance to control their own destiny. But, you’re also asking buyers to give up their salary, their security and to hand over money to run a business, which is often something they’ve never done before.
Put yourself in the shoes of a potential franchisee. Do you think the business is compelling? If you were on the outside, would you be game to make a significant investment in the business? Make sure you can answer these questions with a yes, before moving any further forward. Which brings me to my final point:
5. Is it a win-win?
You have no doubt invested much into your business – both time and money – to develop it to a point where becoming a franchisor is possible. In taking this next step, you are looking for further financial and professional success.
Whilst franchising might be an option, it is also important to look at whether it’s also going to be suitable for franchisees. Is it appealing to them? Can they be as successful in their business as you have been in yours? Not only do you have to bring them on in the first place, but you also must keep them engaged (even more so during the hard times!). There needs to be something tangible in it for them.
If you can continue to offer valuable support, solid training, rewards, benefits and other incentives, your relationship with your franchisees will benefit. And if your franchisees are happy your business will grow and therefore franchising is, and must be, a win-win situation.
Stan Gordon is the CEO of Franchised Food Company; the umbrella company incorporating the brands Cold Rock Ice Creamery, Mr Whippy, Pretzel World and Nutshack.