Franchising is a serious ball game and if you are thinking of expanding your brand to make it as a household name, then this is the better strategy to do it. However, the journey towards making this dream a reality is not a walk in the park either. It can be both ends, it can either bring your business to rapid growth or down the drain. But one thing is for sure, franchising is not an automatic ticket to success. So make sure that if you plan to franchise your existing business, the following requisites should be present. This may not be the perfect formula but at least the checklist below will help you answer the question: Is your business ready for franchising? Read on to know the details.
The Need for Business Evaluation
This is the first step and evaluation here means assessing and aligning the existing business goals and objectives towards being “franchisable”. It takes a significant amount of analysis to determine whether the business structure is on its way to become a franchisor. One instant way to assess is if the business is doing well in terms of income. However, the decision is beyond sales and productivity. There are many factors to be considered and a franchise consultant may be of great help to guide you make a very good evaluation and assessment of the current state of the business.
Check for Credibility
This requires a lot of validated information and it is not only credibility but the current business should have integrity, reliability and authority. All these can be reflected in many aspects of the business such as: number of years in operation, company size, product image or the prototype unit, publicity, consumer awareness of the brand, strength of management to name a few. If all of these are on a positive note, then you are off to a good start.
Product, System or Service Variation
This also refers to differentiation. It helps answer the question of how distinct your product is to the other available franchised competitors in the market. What is it in your product or service that will be different to the existing products? The variation may not only be these but it can be a reduced investment cost, a unique marketing strategy or a different target market. One of these should be adequately distinct for it to make its own name in the franchising world.
Easy Access to System
One of the best features of a successful franchise is the quality of its system or the kind of business operation it utilizes. It is important that the system can be learned easily by its possible franchisee. Hence, the system has to be simple and not too complex as the learning of the system will take a while to be embraced. The rule is that the business must be able to educate the franchisee in a relatively short period of time. Short here refers to the length of time of the system is learned and that it should not be more than three (3) months. The less time for it to be learned, the better it is. This is why the access to the system should be very easy and simple.
The System Should be Adaptable
This applies to the business design’s feature that is should have adaptability. Take note that in franchising, you do not have control over how and where the market will be moving. So, a business that is offered for franchise should stand to whatever market it is exposed. Some considerations in terms of adaptability are consumer tastes and preferences, varying city ordinances and unique locations. All these should be looked into.
A Well-Documented System of Operations
For a franchise to be attractive to possible investors, it has to have an established system. It is a fact that businesses which have succeeded had reputable systems. This means that their process of operation is documented in a way that it can be communicated effectively to its franchisees. This includes the company’s policies, forms, systems, procedures, business practices, employee handbooks, and training modules. Moreover, the business has to have a comprehensive manual of operations and at the same time a computer base system for easy reference needed in franchising.
This is the most important facet of the business structure that should be considered in franchising. This deals with affordability and the ability of the franchisee to pay the cost of the franchise. Depending on the target franchisees, the cost of the franchise should be appropriate and reasonably priced so it can attract more possible investors.
Return on Investment
Profit is the name of the game in franchising. The Return on Investment is considered to be the real acid test of “franchisability”. It is expected that the business must be profitable. Profit here means a reasonable ROI after royalty has been paid. As they say, profitability is relative. To appreciate it, profits must be compared against investment for it to be meaningful. The rule of thumb is that the franchisee should have achieved an ROI of at least fifteen percent (15%) for owner-operators and at least twenty percent (20%) for area developers by its second to third year of operations. Although this is not always the case, it is safe that you have these numbers to compare.
Relationship and Commitment
For the brand to last in the market, it takes two to tango. This goal is very much evident in the business of franchising as it refers to the cooperative association between two entities, the franchisor and the franchisee. The relationship between the two parties should be mutually rewarding to achieve lasting and fulfilling business endeavours. So, the franchisor should have the eye for committed franchisees that share the same vision with its business. In this way, the brand will surely prosper.
This is the last item in the checklist yet the most important in business success. Most often, the breakdown of businesses is due to bad management skills of people who lead it. The lack of experience, skills and knowledge are the most obvious reasons why businesses failed. Thus, before deciding if your business is ready for franchising, check out the people who are on top of the organization. Their presence will make or break the future of your product or service.
About the Author
Kit Kalagayan recently opened Star Frappe, a franchising business he opened based on his created recipe of coffee shakes and juices. He operates the business with his business partner in the Philippines. You can follow Kit at Twitter.