Determine Franchisability: Learn Our 8 Keys to Franchisability
Whether or not to franchise is not an easy decision. You’ll need to consider the business issues and weigh the pros and cons from an informed perspective.
Franchising as a rapid expansion tactic is one of several options you should consider for its tremendous potential to grow your business quickly.
How does franchising work? The key is in the creation of systems, which can be successfully duplicated through training and support.
Characteristics of a business that are attractive to potential franchisees include:
- Good track record of profitability
- Built around a unique or unusual concept
- Broad geographic appeal
- Relatively easy to operate
- Relatively inexpensive to operate
- Easily duplicated
A good place to start is our overview of franchising. You may also access comprehensive information on how to franchise.
Despite the impressive merits, franchising is not for every business.
There is high risk in franchising any new, unproven business.
Established companies that should probably not franchise include businesses:
- Difficult to monitor from long distances
- Requiring large numbers of employees
- With complex operations
- With low profit margins
And being franchisable doesn’t guarantee your success. Franchising the right way will help you to avoid a number of costly mistakes.
8 Keys to Franchisability
Taking into account the various factors that contribute to the success of a franchise program, we have identified eight keys to franchisability, against which you can measure your business:
Has your business been in operation long enough to project its future success? Is it large enough to provide a level of earnings that would make it an attractive investment?
Is it making money? Consistently? Predictably?
Can other people be taught to run your business in the same way that you do, the way that has made it successful?
Can all of the daily operations of your business be analyzed and fully described in an operations manual that another individual could follow to produce the same results you achieve? Can every task be replicated?
Can your business concept be effectively communicated and sold to others?
Can your business work just as well in another part of the country or in different market situations?
Do you have a point of difference from your competitors? If you’re just saying, “Buy my product because I’d rather get rich than have them get rich,” you are not going to be successful – in business or in a franchise system. Will something distinctive about your business result in consumers buying your product or service? A “hot and juicy” hamburger, for instance, or a winning marketing concept. Coastal Fitness Center, a chain of health and fitness centers for women, conducts a membership blitz before each new unit opens, thus providing the unit with start-up revenue before day-to-day expenses are incurred.
A business that is profitable for you might not be profitable for the franchisee. Does enough profit remain, after a franchisee has paid the initial investment in your franchise fee, the costs of getting into business and an ongoing royalty? Will they need significant financing? Can you help them obtain it?
How do you tell if your small business (or large business) is a prime franchise candidate?
If you’re ready to franchise, our checklist will guide you through the process.
If you’re still not sure, a Francorp franchise analyst will consult with you on the franchisability of your business.
The Francorp track record is solid. We’ve consulted with and provided franchising information to over 14,000 companies. We’ve helped more than 5,000 companies to successfully franchise their businesses.