Home » Advice » When is it Time to Franchise Your Business? [ANSWERS]
Photo Credit: Michelle Wright

When is it Time to Franchise Your Business? [ANSWERS]

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The point in which an entrepreneur reaches success is a huge milestone. After the stresses of creating, building, employing, and running your business, finally reaching a place of solid ground is something to be hugely proud of. Without resting on their laurels, an entrepreneur must also make some choices about their steady business. One choice is in whether to franchise their business or not. With the one choice comes a mountain of questions. The most important one being when exactly is the right time to franchise your business?

Rescue a CEO and CEO Blog Nation asked entrepreneurs for tips on how to know when it’s the right time to franchise your business.

 

Photo Credit: Michelle Wright

Photo Credit: Michelle Wright

Looking at a niche business

I decided that the franchise model would work best as my business is a niche business (we train pregnant and post-natal women) and perfect for striking the work / life balance for mothers. I already tried a “lease” type arrangement, but found that trainers I had working for me, needed to be more committed to creating their community within their business – a franchise gives ownership to create and drive their own business, while being part of a team… and never feel like you are working alone. Also, mishfit had very clear profits and I had already systemised the business, so it was very easy to move into the franchise model. I had done all the hard work, and it is a great way to share this… a win win situation I think!

Thanks to Michelle Wright, Mishfit

 

Photo Credit: Gerry Faehrmann

Photo Credit: Gerry Faehrmann

When you fully understand the business process

We have had all our legal documentation for franchising completed 4-5 years ago, however, we just didn’t feel right about taking the next step. The time has come, however, where we feel that we understand all the business processes, customer needs etc. Having a clear and confident understanding of the whole business and all the challenges you may face makes you feel more confident in selling the 1st franchise. After all, the 1st franchise needs to be your biggest fan when it comes to rolling out the subsequent franchises.

Thanks to Gerry Faehrmann, Lawn Green

 

Photo Credit: Jane Garber

Photo Credit: Jane Garber

A business model strong enough to be replicated

Before venturing down the franchising path, a strong business model needs to be developed. Such business model then needs to have the ability to be replicated, which is what franchising is all about. It is also recommended to have a good trading history for at least 12 months. Further consideration needs to be given to the resources required for support of future franchisees and the creation of proper infra-structure. In addition, there are franchising laws which regulate the industry in Australia and the paperwork, which each franchisor is required to produce on annual basis. Obtaining specialist legal advice is highly recommended if franchising is one of the expansion options.

Thanks to Jane Garber, Mason Sier Turnbull

 

Photo Credit: Ian Aronovich

Photo Credit: Ian Aronovich

When you have a great track record

When your business has a great track record and you have a loyal customer following with increasing demand in regions you don’t yet service, you can consider franchising your business—but only if you can find franchisees that will live up to the quality and service your brand communicates. This requires having franchisees who know your business model inside and out and are able to implement it. Specifically, you’ll want your franchisees to please your customers the way your company does. With a strong brand, customers will flock to your franchised establishments, but they will expect the same level of service as that which you currently provide. Thus, only franchise your business if you know that your franchisees are up to the task of maintaining the same level of customer satisfaction that your brand demands.

Thanks to Ian Aronovich, GovernmentAuctions

 

Photo Credit: Chuck Solomon

Photo Credit: Chuck Solomon

Stay focused on existing offices

While in the midst of creating our business concept, I reviewed several options on how to get our concept out in the marketplace. So for us we started from the very beginning with the goal of having a location serving every city in the United States. The franchise/affiliate model allows for that expansion with capital coming from the local affiliates. I don’t think it is ever too soon to think about growing a business through franchising. A key to success is to stay focused on the success of your existing locations. Their success will breed others interested in replicating the business concept in new locales.

Thanks to Chuck Solomon, Nest Home Improvement

 

Photo Credit: Stuart Lindsay

Photo Credit: Stuart Lindsay

Having ‘proof of concept’

No one is ever really ready to franchise their business. Business owners know there are always changes and improvements they would like to make to their business and they let this hold them back. However, if you have at least 2 or 3 company owned sites, vans or sales people, and they are performing well (strong sales and profitability), then you have what we call ‘proof of concept’ and you’re ready to consider starting the journey. Combine your proof of concept with a strong desire to franchise your business and you are now ready to go. Both your desire to franchise and the business’ performance must be strong if you’re going to really succeed at franchising. Don’t let those changes and improvements get in the way of your plans, businesses always change as they start developing their franchise model so those improvements you want to make can be done along the way.

Thanks to Stuart Lindsay, Pitcher Partners Growth

 

Photo Credit: Andrea Funk

Photo Credit: Andrea Funk

Because the company could use expansion

My business has steadily increased since 1992. In 2010, I was running out of room in my basement to sustain my growth rate. I already had 10 employees crammed into 1100 square feet. I had been searching for a building for 8 years to house the business, but could not find the appropriate space. I also questioned my sanity of being able to supervise an even larger workforce. It is so important to me that Too Cool T-shirt Quilts makes the highest quality and most dynamic T-shirt quilts. So I began thinking about different business structures that I could employ. One day when my husband and I we out biking on our tandem, we passed through a commercial district on the edge of town – one with MacDonald’s, Subways and the like. It dawned on me that I could franchise my business. It thought it was perfect solution. Each franchise would make quilts just like we do here, they could also be on my website and the quality and personal attention to each quilt could continue. Now, we have 5 franchise locations and the structure is working just like I had envisioned. Franchising a business that makes such a unique craft product is unheard of. It’s been a lot of fun being a trail blazer a new path for arts and crafters.

Thanks to Andrea Funk, Too Cool T-shirt Quilts Inc.

 

Photo Credit: Michael Pesochinsky

Photo Credit: Michael Pesochinsky

When your business becomes profitable

Signs your company can consider franchising are when your business is profitable, in high demand, has a proven record and a strong, identifiable brand. However, you should only go through with franchising if your business’s success can be replicated. If franchising is the path you wish to take, you have to make sure you have committed franchisees to work with who are capable of replicating your business model and continuing to grow your brand. Regardless of how successful you are, if a talented franchisee comes along and cannot replicate your success, franchising may not be the right route for your company to take.

Thanks to Michael Pesochinsky, GovernmentBargains

 

Photo Credit: Adrienne Leigh

Photo Credit: Adrienne Leigh

Ask yourself the difficult questions

New franchisors go out of business with more regularity than new entrepreneurial start—ups…so before you decide to franchise your business you need to ask yourself a few questions: 1) Have you proven that you have a replicable model? Having more than 1 unit/location of your business is helpful to show that this is not just a one shop wonder, but that it can succeed in multiple locations. 2) Do you have enough money to make it for longer than the first year? Everyone thinks they have the greatest concept since McDonalds…but it may take some time to get other people to believe that enough to invest their own money! Do you have enough money not only to cover the cost of developing the franchise and the FDD and Operating Manuals, etc and getting FTC approval plus another $100,000 in working capital minimum? 3) Do you have people on your team that know and understand not only you industry but also the franchise industry? Franchising has a lot of quirks and someone with specific franchise expertise will be an asset that will save you in the long run!

Thanks to Adrienne Leigh, Murphy Business Brokers

 

Photo Credit: Doreen Foxwell

Photo Credit: Doreen Foxwell

Showing that the business is a viable opportunity

From the moment I had an epiphany to start my children’s yoga business 9 years ago, I knew it would become a franchise. However, it took 8 years to get there. I had to build it to the point that it could show it was a viable and credible business opportunity. It grew into 3 states and 10 counties before I decided it was time. However the final factor for me to franchise it was when a building I was renting space in was sold and I had to move all operations back into the home office. This is when I had the working capital to franchise.

Thanks to Doreen Foxwell, The Children’s School of Yoga

 

Photo Credit: George Slusser

Photo Credit: George Slusser

When you can recreate and document the “magic”

The quick answer is: when you have been able to duplicate the success of your original store or service in at least a second location preferably not in the same market. The success should be documented and achieved by the creating a standardized process with guidelines to the entire operation. It is also preferred that someone other than the owner was able to realize much of the success of the original store or service. Potential franchisees are looking for the “magic,” which can be quantified into a system of tools and processes when implemented has a high likelihood of success. Customers may love your product, but if the concept can not be repeated in a profitable fashion it is wise to stay as a hopefully very successful single operation.

Thanks to George Slusser, Sperry Van Ness International Corporation

About Gresham Harkless Jr.

Gresham Harkless is a Media Consultant for Blue 16 Media and the Blogger-in-Chief for CEO Blog Nation. CEO Blog Nation is a community of blogs for entrepreneurs and business owners. Started in much the same way as most small businesses, CEO Blog Nation captures the essence of entrepreneurship by allowing entrepreneurs and business owners to have a voice. CEO Blog Nation provides news, information, events and even startup business tips for entrepreneurs, startups and business owners to succeed.
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