The idea of expanding a business by turning it into a franchise is definitely something that will be interesting to a lot of entrepreneurs. Franchising will give you the chance to replicate your business model, reach new markets, and – perhaps the most beneficial element of all – create a passive income.
However, although this might all sound great, there are some things you’ll need to consider before taking the leap. It’s crucial to assess whether your business really is ready for this next step because you’ll only really have one chance to get it right. With that in mind, read on to find out more about what you should be looking out for if you want to know whether your business is ready to be a franchise.
A Profitable Business Model
When you are working out whether your business is ready to be a franchise, it’s best to start with the business model itself. It needs to be solid and profitable if you are going to stand a good chance of making it into the kind of franchise that people want to buy into. The first thing to determine is whether or not your business has shown consistent profitability over a sustained amount of time. Look at your bank statements, balance sheets, and cash flow reports to see if this is the case. You’ll need to look at where there was positive revenue growth and healthy profit margins and ensure this is replicated.
You should also check the sustainability and scaleability of your business model. Can it be easily replicated in other places, including other countries? Does your business rely on you personally, or can other people run their own branches of it? Are there standardised processes that other people can easily follow that will ensure each franchise is run in exactly the same way? If these things are not in place, you’ll need to ensure they are before taking any steps towards franchising.
It’s a great idea to speak to trusted mentors and industry experts to see if your business idea is viable as a franchise. They can give you valuable insights into the things you might not have thought about doing, helping you make the final decision about when to move forward.
An Established Brand Identity
A strong brand identity – and a positive reputation – is hugely important when it comes to whether or not your business is ready to be a franchise and whether or not that franchise will be a success. Before you start to set yourself up as a franchise, you need to look entirely objectively at your brand’s identity. Your brand must be strong and easily recognisable, because this is what will make potential franchisees interested in buying a franchise – they’ll know it won’t be so difficult to find customers when they begin.
Building a reputable brand image means always delivering high-quality products and services, providing exceptional customer service, and having a strong online presence, among other things. It’s a good idea to actively improve your brand’s recognition by ensuring you engage with people on social media and get back to costumers quickly if they have concerns or problems. Although you won’t be available 24/7, you can still give customers good service by having a live chat system in place. Although the answer might still have to wait, the customer won’t feel as though they are being ignored, and this can make a big difference to your reputation. It’s also a good idea to actively monitor any online reviews. You can thank people if they leave a positive review, and if it’s a negative one, you can take steps to put things right. When you have a positive brand reputation, you can instill confidence in people who might consider buying a franchise from you, giving you the best chance of success.
Not only this, but when you have a good reputation and a unique brand identity, you can set yourself apart from your competition. Again, this will help people choose your franchise option over and above anyone else’s, and it will ensure you get plenty of customers too, as long as your ideals and goals align with theirs. Make sure you mention what makes you stand out in your marketing materials and the advertising you do for your franchise and business in general so that everyone knows exactly what to expect.
Documented Processes And Operations
If you want to franchise your business and make it a success, you must have well-documented processes and operations in place that can be easily replicated by anyone who might take on a franchise. You should begin this task by creating a full list of operations that your business would go through in the course of a standard day. Once you know what it is you do (a lot of the time, you’ll do these things without even thinking about it, so taking the time to be mindful about every move you make in a day at work will be worthwhile to help you understand exactly what it is you need to note down), you can set about creating an operations manual.
The operations manual for your business needs to outline every aspect of your business, from sales procedures to inventory management, from employee training to customer service, and so on. This is because everything you do has to be done in exactly the same way in a different franchise. If there are any significant differences, customers will become confused, and your reputation could be ruined.
The operations manual will be a kind of guidebook for anyone who buys a franchise, and you need to write it into their contract that they will follow it to the letter – it will help them and you at the same time. This is why the instructions in the manual have to be in-depth and step-by-step, even if you think it’s not necessary. It’s better to be safe than sorry and include too much information than too little.
Market Demand
You might have a wonderful business that makes you a decent amount of money, and that keeps you busy. However, that does not necessarily mean that the same will happen if you franchise the business. It could be that if you sell franchises, you find that your franchisees don’t have enough work to keep them sustainable. This is why it’s crucial to know that your business has enough market demand.
The best way to determine the demand for your business and to see if it’s something that can grow in the way you want it to is to do plenty of market research. Look for areas where there is high demand for what you do because these are the areas where you should focus your marketing when it comes to your franchise. It’s also wise to look at whether there are any gaps in the market or whether whatever it is you sell or provide is already covered.
Of course, even if there are competitors for your business, that doesn’t mean there won’t be market demand for what you do; it will come down to your brand identity and your USP, as we’ve mentioned above.
The key is adaptability. How adaptable is your business when it comes to changing for different markets? You’ll need to keep the core of what you do the same, which is why the processes and systems we mentioned earlier as important, but if there needs to be any modifications made to ensure your business can be successful in other places, this is certainly something you’ll need to think about; it’s something your potential franchisees will think about. Having a USP that resonates with a specific market can increase market demand and ensure your franchise is successful.
Financial Stability
Franchising might seem like something you can do easily if you feel your business is ready to take this step, but in reality, creating a franchise takes a lot of time, effort, and, of course, money. Before you can continue with your franchise idea, you need to check that your business is financially stable and that you have all the resources you’ll need to support the development of the franchise. Plus, don’t forget that you’ll have to offer support to your franchisees if you want them to be satisfied with their purchase and happy to give it their all.
You will already have carried out a thorough financial analysis of your business to check that your business model is profitable, but you should also make sure you have access to capital in case you need it. This means being in a good position to borrow money if it’s required, so you must ensure that any debts you currently have are always paid back on time and that you know what your budget is. You should also have a good business plan in place to show potential lenders.
Your business plan will need to include all the information you can think of about your future plans for the business, including your franchise ideas. In this way, a potential lender will be able to determine whether or not lending to you is a good idea. If they refuse, this could be a good sign that your idea needs much more consideration.
