Franchising is the technique for any business regardless of its size to expand its operation into other branches. This process is regarded as one of the safest means of accomplishing growth. However, it requires careful planning to be successful. If you can set up your course of action appropriately, there are many advantages to going this route that includes:
- Providing an affordable means of increasing the scope of your business;
- Dispersing the financial risk of expansion to a large realm than before;
- You can buy products or goods in bulk now that will benefit the entire network, and lead to increase in both competition amongst the offices and your profit margins.
Keep in mind that franchising does have its drawbacks. The franchisor relinquishes some control and profit by selling franchises to outside parties, risks conflict with franchisees and will see lower returns until the franchise network has built up to a critical mass.
Make up of a Business Concept Franchise
- The franchisor – A company that lends its trademark or trade name as well as its structure of doing business to the franchisee;
- The franchisee – A party that pays royalties and an initial franchise fee for the right to do business under the franchisor’s name and system.
TURNING YOUR BUSINESS INTO A SUCCESSFUL FRANCHISE
Before you do anything else, you have to take stock in what has made your business successful in the first place. Therefore, you have to ask yourself these questions:
- Is turning your business into a franchise a new or unique concept that has the potential to expand beyond your local area into national or international conglomerate?
- How easy will it be it to train others to practice and follow your rules and procedures of your system?
- Are your business’ operating systems of the concept efficient, refined and replicable? Will the profit margins that are built into the concept be large enough to allow every franchisee to realize an attractive return of investment?
- Can a franchise attract a number of franchisees if it’s affordable enough?
Acquire Legal Advice
What you are selling is the rights to use your trademark and/or trade name; therefore, you need to make sure that you can assert legal ownership over these things in the event that you have prosecute someone that is found copying it. Your name or trademark must be registered with the USPTO and WIPO with no exceptions.
Form a Business Plan
This will provide a means to appraise the present and future of the business, define short- and long-term objectives and establish a framework for action to achieve them. Your bank has the ability to help you with your plan if you need assistance. Preparation will help you identify how quickly you can expand, your competition and whether or not your system will be able to compete with them.
Included in the Franchise Offer
Define the franchise package by deciding exactly what you will be offering franchisees. Include the concept that has your trademark and/or trade name, initial assistance, continuing training and support, bulk purchasing power and sharing the advertising costs. You may include other areas such as accounting software and IT equipment. The agreement drafting should be drawn by specialized legal counsel so that all parties are protected, and the control of the trademarks is never in question once a franchisee in no longer part of the organization. Use your franchise counsel to register your opportunity in the States where separate registration is required.
Testing Your Concept in the Marketplace
You must test your franchise concept in one particular area of the marketplace if you think you have a chance of succeeding. The pilot run will tell you the best ways of recruiting and selecting franchisees as well as the kind of support that they will need to start operations. These lessons will prove invaluable to the success of your network.
Be sure to develop a franchise brochure that will help sell the opportunity and obtain outside help to market your concept.
Picking the Best Apples from the Tree
Like the apple farmer determining the choicest crop from his/her orchard, selecting the right franchisees is pivotal. Regardless of the catchiness of your trade name and firmness of your business concept, the franchisees will determine if your business expansion will succeed or fail for a given area. If the concept is proven successful, it will be easier to increase the number of franchises.
Therefore, you must investigate thoroughly the backgrounds of the applicants.
Ask yourself:
- Are they enthusiastic and hardworking or likely to give up at the first challenge that they approach?
- Has their prior experience proven their level of success at management level?
- Do they have a record of stable finances?
- Have they had a record of honest business practices?
Granted, you’ll never have complete assurance that an applicant has what it takes to succeed. Your instincts should give you a solid determination to select the best candidates and have them sign your franchise agreement.
Remember that if you are going to franchise your business, you cannot allow it to become static. You will have to make changes to the concept along the way and package your offer based on the response. Review your base on an annual basis, and determine what changes need to be made for the improvement of the entire network.