Should You Franchise Your Business?
Franchising your current business could be an option for you, if you feel you are ready to take the next step in your growth cycle. Great wealth has been created by a multitude of business owners who have used franchising as their growth vehicle. If you are starting to think big as it relates to your business, fasten your seat belt! This could be a fun ride…….
One huge advantage with franchising, is that you can use OPM {Other People’s Money}, to fund your expansion. Another words, if you choose instead to add more business units by adding “company stores”, it can get very expensive. Obtaining large loans or getting investors can be challenging, and expensive.
By using OPM, they put in their capital to fund your expansion. Of course you will still have to make a sizable investment for infrastructure, marketing, technology, and support, but your franchisees open the units, and run them. One other thing…You will charge them an entry fee {Franchise fee} to allow them to use your systems etc, and you will get a percentage of their monthly sales {Royalties}, too!
So in a perfect scenario, you have the potential to receive upfront and monthly fees from investors, who also happen to run their businesses that you gave them the model for, and they then use your tools to become successful. It can be a win-win.
If, however, you skimp on development costs up front, and use shortcuts to get your franchise company up and running, it could prove to be a disaster. Angry franchisees, and possible litigation from them, and others, could ruin things for you, and leave a bitter taste in your mouth towards franchising.
We highly recommend that you use development companies that have experience in all types of franchised businesses, and that will take their time to do things the right way.
If you are considering franchising your business, here is a short checklist that will help you decide:
1. Do you have a time
tested, proven business model?
2. Have you duplicated your concept at least once?
3. Do you have the basis for a detailed start-up
operations manual?
4. Do you have the desire and energy to expand your
concept in a big way?
5. Is your concept unique? Does it fill an unmet need?
6. Are the profit margins large enough to attract
franchisees?
7. Is there a formal training program in place? Or can
you design one?
8. Do you have strong relationships with lenders? Can
you get investment capital?
9. Is there technology in place, to help with
efficiency?
10. Are you prepared for the legalities involved with
franchise laws and regulations?
My strategic partner in Franchise Development is very well known in the franchise industry. His firm does not franchise everybody that wants to franchise their business. Be careful. Some Franchise Development firms will help franchise any concept if the owner of the concept can pay the development fees....
Contact me, Joel Libava, President of Franchise Selection Specialists Inc. for a conversation, and a direct referral to this ethical firm.
Phone: 216-831-2610
E-Mail: franpro@sbcglobal.net
