Turning your business into a franchise is a very detailed process. However, the venture can be very lucrative if it is done right. Franchises makeup almost 11 percent of all businesses and account for almost $1.5 trillion in revenue each year. Here are some tips to follow if you are thinking about turning your company into a franchise.
1. You Must Know Your Business Like the Back of Your Hand
You will have to provide franchisees with very specific directions. What attracts most franchisees is the ability to start their own business without having to go through the typical trial-and-error phase. They can simply start running a proven system. It will be your job to show them how to do everything from ordering supplies to keeping the books. You must outline your entire business model and give your franchisees guidance along the way.
2. Learn About the Financial and Legal Aspects
Item 19 on FDD filings is very important for every hopeful franchisor. This is where potential franchisees will analyze your financial performance when deciding whether or not to invest in your company. If there are any discrepancies in your company’s item 19, franchisees may decline to work with you. This is an area where you may want to seek professional help. The International Franchise Association is a great financial and legal resource for everything that involves franchising.
3. Know Your Goals
To be a successful franchisor, you must realistically map your goals. Are you looking to expand nationally or internationally, or are you looking to add a few more local locations? You must also consider in what places your business model will work and how different territories will accept your brand. If your brand has recognition in California, it may be reasonable for you to expand to surrounding states such as Nevada and Arizona. You wouldn’t, however, want to jump from California to New York without first making an impression.
4. Carefully Choose Your Contractors
You have most likely already entrusted the services of a few contractors and/or suppliers. However, you will need to ensure that these contractors and suppliers have the capacity to meet your demands as you expand. If your current contractors and suppliers only do business locally and you are looking to expand nationally, you will need to fill that void.
Furthermore, you need to make sure that your business partners will be reliable and deliver excellent service to all your franchisees. Services like shipping and receiving could be done by a single freight company in San Diego or in your locale.
Starting a business from the bottom-up is similar to baking bread for the first time. It requires trial and error as well as a few bad batches before you find out what works. As a franchisor, you have removed this important but costly step, and have molded a business model that is profitable and can be easily duplicated. Your job now is to figure your plans for expansion and to attract franchisees by mainly demonstrating your company’s financial performance.