If you want to expand, but lack the money, the people and the time, it may be time to think about franchising. The primary barrier to expansion that today’s entrepreneur faces is lack of capital. And franchising allows companies to expand without the risk of debt or the cost of equity. Since franchisees provide the initial investment at the unit level, franchising allows for expansion with minimal capital investment on the part of the franchisor. In addition, since it’s the franchisee, and not the franchisor, who signs the lease and commits to various service contracts, franchising allows for expansion with virtually no contingent liability, thus greatly reducing a franchisor’s risk.
Almost every business can be franchised, but not every business should be franchised. Explore the franchisability of your business
Do you have a distinct Brand identity?
If consumers can’t recognise your brand logo, you’re not convincing prospective franchisees that you have loyal customers. A track-record over time and a good local press or public acclaim will be great.
Do you have an awesome product or service?
Having a niche in your market sets you apart from the pack. Business should be sustainable and have competitive advantage. Also its important that it should be marketable as a business opportunity.
Is it easy to understand and replicate your operational process?
It makes no sense if it requires a rocket engineer to replicate the business operations. The systems should be in place. Operating procedures well documented and process such that someone can learn to operate your business in three months or less.
Do you have a successful business model? Can the Business survive after paying franchise related costs?
No one will be interested if the business isn’t profitable. Prospective franchises will want to know how much money will actually go into their bank account. If a business can’t generate a 15 to 20 percent return on investment after deducting a royalty (typically between 4 and 8 percent), it’s going to have difficulty keeping franchisees happy.
If your business meets these criteria, then it may be a good candidate for franchising.