Can your business be franchised? If you have a thriving business that is receptive to a regional or national marketing system, then franchising may be the right choice. To help you determine if your business could be a franchise, consider some of the qualifiers outlined below.
First of all, evaluate yourself as a potential franchisor. Franchising is more than the business of selling services or products. He will also be a mentor, coach and perpetual supporter of his franchisees. He will also collect an initial fee to get the franchise up and running and then receive royalties over the life of the franchise.
Always remember to allow your individual franchisees the flexibility to run their own businesses and always allow them to act as independent business owners, not employees. It is important that you carefully set out the guidelines for the franchisee relationship in the original agreement, franchise disclosure document, and all communications with franchisees.
Don’t consider franchising your business unless you have an identified local market for your product or service. Marketability is established by need, and need is determined by competition. If you have a unique way of operating a business and have a unique business model, it is feasible that you can franchise it.
Demand is the essential force here. It is as central as the singularity. Your unique product or service should be desired not only by the entrepreneurs who want to buy franchises from you, but also by the people who will buy products or services from those franchisees. If your product or service is relatively new and is not widely offered by anyone else, but it is in demand, you first need to determine where your products or services would sell, based on requests from your current customers.
If your product or service is not new, you can hire market research companies to create reports on the types of consumers in various regions. You can also conduct your own study on the Internet. Government agencies may also provide demographic information and market research data. The US Department of Commerce’s Bureau of Economic Analysis and the US Department of Labor’s Bureau of Labor Statistics have conducted extensive studies of regional consumer behaviors. Search for “consumption habits” on these government websites. If your product or service is unique or in demand, ensure this uniqueness by using a trademark, for a product, or a service mark, for services, so that the public connects your product with a particular trademark. Apply for a trademark as soon as possible, before the first franchise agreement is offered and reached. Determine that no other entity has already obtained the rights to your brand. You can do this for less than $600 by contacting one of the many trademark search firms or by going online at http://www.uspto.gov.
Before starting your franchise plan, prepare a comprehensive business plan so you can see the financial outlay each new franchisee will require to get up and running; then compare that to the income you can expect to receive from fees, royalties, and sales. Include costs that are specific to the franchise, such as operating costs, such as salaries and benefits for you and head office employees, trainers, and sales staff; as well as rent, office equipment, car allowances, and travel. Include the cost of finding franchises: advertisements, travel to franchise shows, preparation of brochures and videos, and entertainment. Add an appropriate amount for initial and ongoing legal, accounting, and advertising fees.
Be very conservative about the time and income you need from your franchisees. You will have determined the mix of franchise fees, royalties, and sales of products or services that will generate income from your franchisees. Estimate when you expect this revenue to be paid, rather than basing your predictions on how your business has performed in the past.
