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When to franchise your business


Franchising may be the next big step for your business and represents an opportunity to grow your brand. So, how do you know if franchising is right for you? How do you know if your business is franchisable and, if it is, whether you should franchise your business? To answer these questions, you must evaluate whether your business is franchisable and, if it is, whether your individual goals and your business goals align with franchising and establishing a franchise organization responsible for on-boarding, training, and supporting franchisees.

So, if you have questions like “should I franchise my business,” in this guide we’ll walk you through the process for determining whether your business is franchisable and whether franchising may be right for you.

Is Your Business Franchisable?

Determining whether or not your business is franchisable and that you are ready for franchising requires an evaluation of the following five franchisability factors:

  • Is your business successful?

  • Is your business scalable?

  • Is your brand protectable?

  • Are you committed to growing a franchise system? and

  • Do you have the right budget?

Franchisability Factor #1 – Is Your Business Successful?

Franchising is all about success and taking the business, brand, systems, and know-how that have allowed you to make your business a success and duplicating these systems for your franchisee partners. Your business must be successful and must have a track record of results.

Franchisability Factor #2 – Is Your Business Scalable?

Can your business model be successfully duplicated by franchisee partners? If it can, then your business is scalable. Scalability questions to consider include:

  1. Can you train franchisees to successfully deliver the same products or services that have made your business a success?

  2. Can you develop systems to support franchisees and ensure that they maintain consistent levels of quality and customer service?

  3. Can you support franchisees by delivering the necessary products (for example, ingredients and branded packaging for food service businesses) and support systems (for example, customer relationship management systems and call centers for service-based businesses) for their day-to-day operations?

  4. Are you willing to spend the time and, as your system grows, build a team to support your franchisees and improve your business systems?

  5. Will your franchisees be profitable if they follow your systems and business model?

Franchisability Factor #3 – Is Your Brand Protectable?

As a franchisor, one of the primary assets that you will be licensing and conveying to your franchisees is your brand. So, your brand needs to be protected and secure. To protect your brand, you need to own and control your business and trade name – at the most basic level, (a) register your trademark (i.e., your brand name) with the United States Patent and Trademark Office (USPTO) and (b) control the website url domain name for your brand (i.e., www.yourbrand.com). Brand protection questions to consider:

  1. Is your business trade name registered with the USPTO? If it is not, is it capable of obtaining USPTO registration in the future?

  2. Do you control the url website address for your brand name?

  3. Are there competitors who use an almost identical brand name, i.e., your brand name is somewhat generic?

Franchisability Factor #4 – Are You Committed to Building a Franchise System?

Many times, the most successful franchise systems are not the ones with the best ideas, products, or services; they are the ones with the best execution and commitment to building a franchise system. Whether your franchise management team will start off as a team of one (just you) or a team of four, franchise success and the franchisability of your business have a lot to do with your commitment to building a franchise system. Commitment questions to consider:

  1. Are you ready to commit to a 1-, 2- and 5-year plan focused on consistently building out a franchise system that will grow over time and not overnight?

  2. Are you of the mindset that franchise success has much more to do with consistent execution and focus, rather than just really big ideas?

  3. Are you approaching franchising as a natural outgrowth of the success of your business and your desire to expand and grow your brand?

Franchisability Factor #5 – Do You Have the Right Franchise Budget?

Launching a franchise is like launching any new business, and new businesses require the right budget and capital to grow. Shortcuts are not the answer. Before franchising your business, you need to understand what your franchise goals are, how quickly you want to achieve them, and the right budget necessary to get you to your goals. Remember, launching your franchise system is not the finish line – it is just the start. Budget questions to consider:

  1. What is the cost to launch a franchise system that includes an FDD and franchise infrastructure that is unique to your business and your franchise system and designed to achieve real growth?

  2. What is the cost to protect your trademarks and brand?

  3. What is the cost to register your FDD in the franchise registration states that you are targeting?

  4. After you launch your franchise, what are the ongoing legal costs to maintain your FDD and registrations?

  5. After you launch your franchise, what are the costs that will be incurred in promoting and marketing your franchise system and selling franchises?

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