Ready to Franchise?
There is no simple way to pre-determine the probability of success
for a business undertaking to establish a franchise system. Every business
leader is different and so are the companies they control. While many
successful businesses decide to franchise, not all of them become thriving franchisors. However, the advantages of franchising as opposed to
other methods of distribution, have proven favorable for thousands of
companies around the world.
There are several important success factors to consider before deciding
to undertake franchising. If you can provide positive answers to most
of the following questions, your probability of franchising success
increases dramatically.
- Is your business profitable at all levels? That is, will the franchisee
as well as you, as the Franchise Company owner, make sufficient money? In other words, will both parties share
in the wealth?
- Has your business been in operation long enough to effectively
project its chances of future success?
- Will the franchised business generate sufficient revenue and profits to attract "ideal" franchisee candidates? Does your business produce profits sufficient to provide a level
of earnings that will make it an attractive investment opportunity to
a prospective franchisee?
- Are you eager to expand and capable of providing initial and ongoing
support to franchisees?
- Is your business simple enough that most people can learn how to
operate it effectively with a reasonable amount of training?
- Can your business be analyzed and fully documented for others to
follow by using operation and procedure manuals?
- Do the products and services being offered by your business fill a defined consumer
need? Are they acceptable for a large segment of the market? Do you offer unique products and services
that easily differentiate your company from its competitors?
- Can your business concept be packaged and effectively communicated
and sold to prospective franchisees?
- Have you protected your company’s intellectual property through
properly protected trademarks, trade names, and patents? You do not have to have this done before you decide to franchise, but you would have to be able to do it before you actually create the franchise framework.
- Do you have qualified managerial staff available to assume the responsibility
of overseeing a franchise operation? If not, are you prepared to invest
the financial resources necessary to recruit qualified managers or do currently have employees (including yourself) who you can reassign to the franchise duties?
- Will the initial investment requirements be commensurable with the
projected returns; and, is it realistic to project that "ideal" franchisee candidates will have the required funds or have access
to borrowings?
- Are you prepared to—and capable of—investing the necessary
funds to create a successful franchise system? This includes creation
of operation and procedure manuals, franchise agreements, and other
legal contracts; establishing franchisee-training programs’
and dedicating managerial and support staff to manage the franchise
system.
- Will you be able to offer enough value to your franchisees to maintain a solid ongoing and beneficial relationship with them?
- Is the company prepared to enter into long term agreements with
individuals resulting in business relationships that will last for
many years?
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