3 Reasons Why you should NOT Franchise your Business

Many small business owners have strong grounds to consider franchising as an option to grow their businesses; yet there are also many reasons why some entrepreneurs should stop before they make the same choice. Following are three main reasons why you should NOT consider franchising your business.

  • Underfunding

Franchising is expensive to launch. There are legal, operational, and training documents to prepare and management strategies to develop and implement. In addition, once you are ready to offer the franchise you must have funds available to market the opportunity and to support franchisees.

Many small companies have the finances to get the first step done but fall short when it comes to marketing their opportunity or supporting their franchisees. The resulting slow growth caused by not investing sufficient funds in marketing the franchise can be deadly for many entrepreneurs who aspired to recover their initial investment quickly. Their motivation fades away and many stop their efforts to grow their franchise networks.

Other underfunded franchisors may be able to sell franchises but lack the funds to hire the management and staff to train and support franchisees. The result is not only under-performing franchisees but also unhappy ones both of whom affect your ability to sell more franchises.

  • Non Sustainable Product or Service

If your product or service is a fad or has the chance of its demand decreasing drastically, franchising your business is most likely not the right move. You may be able to sell franchises, but if there is not a strong probability that your franchisees will be able to make income commensurable with the required investment over the life of the franchise agreement, you should not consider franchising the business.

Another facet of sustainability is your ability to provide value to franchisees in an ongoing basis. In other words, do you have a business model that ties the franchisee to you, that makes it valuable to them to be associated with you? Are you able to offer ongoing value for the royalties they have to pay? Or, is the only thing you have to offer your knowledge of how to start and operate the business? If the latter applies, you should probably not consider franchising.

  • Inability to Let Go

If you love what you do and can’t see yourself doing anything else, you may not a good candidate to franchise your business. Granted, it is important to be passionate about your product and your services, however you must be able to let go of your current duties, as the job of a franchisor is different than that of the operator of the business.

If you can’t let go of your current duties, are you willing and able to bring someone else to lead the franchising efforts? If not, you will most likely not be able to grow your franchise and your investment getting it set up will be in vain.

Franchising is a wonderful way to grow a business and it makes sense for many business owners. However, franchising is not for everyone.