IS FRANCHISING THE BEST WAY TO EXPAND YOUR BUSINESS?

 

You want to expand your business and you are wondering whether or not franchising is the best way to do it. To help bring some clarity into this question, I am going to simplify matters in this post. Essentially you need to keep the following in mind:

  • You want your business associates to use the name of your business,
  • You want to dictate to them how to operate their businesses; and
  • You want them to pay you money now and on an ongoing basis.

If all of these three elements are present, the law says you have a franchise. Some people find out the cost of franchising a business and try to call theirs something else:  an agency, a license, or some other form of business opportunity. But as they say:  “If it looks like a duck, swims like a duck and quacks like a duck, it is probably a duck.” So, no matter what you call it, if it has all three of the above conditions, it is a franchise. If you call it something else and are challenged in the future, you are going to lose, and will have to pay severe penalties depending on where you are located or where the dispute arises.

Say you do want to be franchised. You meet all three conditions and furthermore you really think that franchising your business is the right move for you. Unfortunately, it is not that easy. You may meet the definition of franchising as it is set in the franchise rule and may have the desire, resources and energy to franchise your business, but there is more to the equation. There are more questions you need to ask yourself, such as:

  • If I had to pay someone a royalty fee, would my business still be profitable?
  • Do I have marketing, administrative and operational systems in place?
  • Will I offer value to my franchisees, not only in the first year, but on an ongoing basis for the life of the franchise agreement?
  • Do I have a “secret sauce”? That is:  Do I have a significant competitive advantage that allows me to stand out from my competition and that will do the same for my franchisees?
  • Do I have the resources (time and money) to devote to the franchising efforts?
  • Do I want to change what you do to now to recruit, train, and support franchisees as well as making sure that my company stays ahead of the competition?
  • Am I using technology in my business now to the fullest advantage? Am I willing to invest in future technology for communication, marketing, management ease and efficiency purposes?

If you answered “no” to these questions, franchising may not be the best answer for you at present. You need to get some things in place first before you consider franchising your business.

In the next several blog posts, I will be covering each of the above questions in detail. Make sure to come back for more information.