Does it Make Sense for Me to Franchise My Business?
July 18th, 2008 | by mdavis |Recently, we’ve had a number of entrepreneurs asking us questions about whether it makes sense to franchise their businesses. While it’s truly something that should be considered on a case by case basis, we thought we’d provide some basic information to aid in the decision-making process.
Reasons why an entrepreneur might consider franchising a business include:
- Great business model/idea, but a lack of capital or unwillingness to risk one’s own capital
- Desire to get to scale quickly
Whether the business is successful at franchising depends on a number of factors, among them:
- Does it generate the steady cash flows necessary to keep both franchisor and franchisee happy?
- Does the concept resonate with (the right) prospective franchisees?
- Is the model replicable? Are the systems in place and effective?
- Will the underlying product/service meet the needs or expectations of the business’ customers, i.e. does the frozen yogurt taste good?
For expert advice on whether you should franchise your business please check out some information on our partner, The Franchise Edge. They’ll provide a free consultation to assess your business’ needs and determine whether franchising is an appropriate fit for your business.
We’d be interested in hearing any thoughts or experiences our users might have about franchising their businesses.
7 Responses to “Does it Make Sense for Me to Franchise My Business?”
By md2020 on Jul 31, 2008 | Reply
Here’s a related article I came across on a Harvard Business School website.
Making the Decision (or not) to Franchise.
By chrisweeks on Jan 3, 2009 | Reply
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By Express Personnel on Feb 2, 2009 | Reply
Making your business a franchise can be a difficult and time consuming process. Make sure that you have all the pieces in place before trying to take on such a task.
One of the worst things you can do for your brand is have people that are misinformed representing you in the market. This can quickly ruin your reputation and potentially hurt not only your franchises but your own business.
Express Franchising
By hari001 on Feb 12, 2009 | Reply
HI,
Nice blog.
Business Opportunities
By Amanda171 on Mar 24, 2009 | Reply
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Great website with the latest franchise opportunities, has a wide selection of franchise business to select from depending on your budget, skills and interests.
By dantova on Aug 11, 2009 | Reply
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By Patrick Maslyn on Feb 22, 2010 | Reply
Nearly any kind of business can be franchised. Of course, that does not mean that all should be. Generally, it is important to have developed a track record of success and an ability to replicate that success. This usually means having successfully operated multiple units using a consistent, uniform set of procedures that create a consistent customer experience. Also, it is important to make sure that the financial elements will support the operation of the system. This means setting the fee structure in such a way to make it possible for the franchisee to earn enough of a return to make the purchase of the franchise worthwhile — you can’t squeeze the franchisee’s margin so much with a royalty (and ad fee) that they won’t be able to make a profit. It also means that you estabish what the franchisor’s break even point will be. How many franchises do you have to establish generate enough of a royalty stream to offset the costs of running a franchise system? And, finally, you need to be able to demonstrate how your business is differentiated from your competitors (both franchised and not franchised).
A lot of these considerations are things that experienced business people will have already thought through. But, they often don;t realize/understand the costs associated with franchising and, therefore tend to underestimate how many units to have to have before they break even. A lawyer with a solid background in franchsing can help identify many of those costs, but you might also want to talk to a franchise consultant (choose all of your advisors wisely, however).