is your business franchisable?
Franchising is an excellent growth strategy, but it isn’t for every entrepreneur or every business model. The first step is to determine if your business is suitable for franchising. Franchise brands cover almost every category of products and services. In 2022, it is estimated that there will be over 792,000 franchise establishments in the United States.
You’re likely here on our website because you’ve demonstrated that your business is sustainable through company outlets, but is it scalable through franchising? Lets evaluate. There are many factors to consider.
Suitability Factors to consider when franchising
There is no set formula, but successfully franchised businesses tend to have several key qualities in common. Franchising only works if your model can be replicated successfully. Initially, consider these factors:
- Proven Business Model: Your business should have a well-established and successful operating model with a track record of profitability.
- Standardized Operations: The business should have standardized procedures and systems that are documented and can be easily replicated.
- Scalability: The business model should be scalable, meaning it can be expanded to new locations without a significant drop in quality or efficiency.
- Unique Selling Proposition: Your business should have a strong and unique selling proposition that differentiates it from competitors and appeals to potential franchisees.
- Consumer Demand: There should be a clear demand for your products or services in various locations.
- Brand Image: A strong and recognizable brand can attract potential franchisees and customers, and it must be suitable for federally trademark registration.
- Marketing Strategy: There should have a proven marketing strategy that can be adapted and implemented by franchisees.
- Operational Efficiency: Business operations must be efficient and processes should be optimized for replication
- Adaptability: Your business model should be adaptable in that it can maintain core standards regardless of the location or market.
- Financial Stability: Your business should be financially stable and capable of supporting the costs associated with franchising, including legal fees and franchise development.
Franchise Feasibility Study
Think your business hits the mark, but need expert help?
Consider conducting a feasibility study to assess the potential for franchising and identify potential challenges. A franchise feasibility study provides valuable insights and helps you make informed decisions about whether to proceed with franchising your business. It’s often conducted by a team of experts, including franchise consultants, legal advisors, and financial analysts, to ensure a thorough and objective evaluation. Essentially, the goal is to analyze whether your business is suitable for franchising. It involves assessing the current success and replicability of the business model, analyzing market demand and competition, and estimating financial projections and costs.
Additionally, a franchise feasibility study defines the ideal franchisee profile, plans support infrastructure, evaluates branding and marketing strategies, and analyzes territory viability. The study identifies potential risks and compliance issues, providing a clear understanding of whether franchising is a viable expansion strategy. The study should also help you understand the legal requirements and obligations of franchising.
Franchising in action
Responsible franchising requires the development of legal and operational systems. This requires hard work, and its crucial to find good trading partners.
Legal support
From a legal standpoint, franchise attorneys work with business leads to draft a franchise disclosure document, franchise agreement, and other contracts that are legally required to protect your brand and the franchise system. Legal compliance is an ongoing process, and you must be prepared to expend resources on compliance. Your legal team will play an integral part in your development. Many attorneys offer flat monthly rates to launch and support franchise operations. We encourage all prospective franchisees to interview franchise law firms and see if they are a good fit. Of course, we are biased in that respect and recommend the premier boutique law firm, Waldrop & Colvin.
Operational support
From an operational standpoint, franchising requires operational systems and training programs to be in place. First, an operations manual is created and a training program is developed. Next, support systems are built out to provide initial and ongoing support to franchisees. Vendors and suppliers offer CRMs, mapping softwares, and other digital tools you need to execute. Additionally, internal hires or partnerships are necessary to maintain staffing and obtain key expertise.
Sales Support
Reaching the right audience is key to any sales pitch. Some franchisors build internal sales teams, while others rely on business brokers and consultants. Regardless, selecting the right team is key. Success seldom occurs by happenstance.
The Long Term Vision
Have a clear long-term vision for the franchise system, including growth targets, expansion plans, and support structures. Its okay to have unrealistic goals, but you must plan and execute with intention. The first franchises are the most important as new franchisors learn to franchise and grow the brands regionally. Decide where you want to be and then develop a 1 year, 3 year, and 5 year plan.