One of the first questions you should ask yourself when considering franchising your business is whether or not you clear enough money every month from your business to have a viable franchise model. In other words: your business has to be profitable. If you are barely making it every month, why would anyone want to replicate what you do? Your business has to make enough money to make sense to a franchisee. In addition, as a franchisor you want and need to be remunerated for supporting and training your franchisees, yet the franchisee has to make enough money from the business to be able to pay you for these services and still make a reasonable living out of the business. So, one of the first things I ask my clients is whether or not they are making enough money to add another cost. In other words, could they pay for something else they are not paying for now and still be satisfied with the income they make from their business?
If the answer is to this question is positive and you have a profitable business and enough room to add another layer of costs, then franchising becomes an option to investigate further. On the other hand, if you make a good profit but don’t believe that adding another cost layer will keep the sustainability of the business intact, then you need to explore other expansion vehicles that don’t require monthly contributions. A better alternative however is to analyze your business and determine how you can improve the model and make it more profitable. If you do so, whether or not you decide to franchise your business, you will still benefit from this effort.
Creating a franchise model requires reverse engineering. That is: you start with your franchisees’ bottom line in mind and analyze the business systems and operations to ensure the financial success of each franchisee. You start with the question: Will my franchisees be profitable? This initial inquiry should lead you to the following analysis:
- What changes, if any, do I need to make in order to make the business model more viable?
- Will franchisees be successful in all markets across the country; if not, do I need to make changes or better define the target market?
- What services can I provide to my franchisees to help them be more successful and stay ahead of the competition? Can I do so competitively enough?
- Which economic conditions will benefit or hurt my franchisees?
- What can I do to make sure that the business model can survive economic downturns?
- How can I help a struggling franchisee?
Answering these questions will help you create the strategies needed to ensure, to the best of your ability, the financial success of your franchisees.
In franchising, the following aphorism must be kept always in mind: “The financial success of franchisees determines the success of the franchisor.” Is your business model able to produce this success? If not, there is work to be done before you become serious about franchising.
