6 signs your business is ready to franchise

Entrepreneur and consultant with Ashtons Franchise Consulting, Rebecca Newenham, explores what company owners need to consider before franchising their business.

Franchising could open up a whole new world of opportunity for your business. But it’s not right for every company. Are you ready to take your business to the next level? Does your brand have what it takes? If you are thinking about franchising your business, make sure you consider these six key factors:

1. A track record of success

Franchising is about replicating a financial model that has already been achieved. If your company has been trading for at least two years, that’s a good start. You should have gotten through the tricky start-up phase and established a proven system by then. Good franchising requires the franchisor to have been through the learning curve, identified the pitfalls and found the solutions. You can then demonstrate to potential franchisees that your business model works and is a worthwhile e investment. 

2. A strong brand

Strong branding is fundamental. People want to invest in a business that portrays a strong corporate identity and is suitable for national or international recognition. If your trading name has been formulated around a location, region or even your name, it may be unsuitable for franchise expansion. Think about rebranding before you consider franchising any further. Your brand should be simple and clearly convey the message of professionalism and quality.

Your product or service must be sufficiently differently from your competitors to be attractive. This doesn’t mean it has to be totally unique. However, it does need a clear point of difference to convince others to buy into it. It also needs to have staying power. Franchisees won’t want to invest in a business with a fashion-led product or service that may become obsolete over time. It’s more about long-term trends than quick wins. Your business needs to be sustainable and transferable to become a successful franchise.

 3. A replicable, teachable concept

You must be able to teach someone else your basic business process within a reasonable time period. If your model requires special skills, then the field of potential franchisees may be reduced. Bear in mind, though, that many franchisees are business people with suitable skills to run a business. They then employ staff with the necessary technical skills to deliver the services.

Think about your existing systems and processes. Are they comprehensive and user-friendly? Can they be operated readily without training? It is worth investing time to ensure your business model is as professional and efficient as possible before you try and sell it to others. Franchisees will be attracted by a professional business opportunity which is ready to hit the ground running.

4. A sufficient profit margin

Franchising is not suited to low-margin business. There must be enough operating profit to sustain growth while enabling both franchisor and franchisee to enjoy a reasonable return. The franchisor must receive a sufficient profit margin to provide good backup and support and continue developing the franchise offering. The franchisee must have enough margin to build a rewarding business over the life of the agreement, and, obviously, do far more than just recover their initial investment and time working on the business. It must be a win-win situation where franchisee and franchisor succeed together.

5. The right management commitment to support others to succeed

Your attitude and commitment to franchising are key to its success. Franchisees are not employees but self-employed business owners who must be treated as equals. As a franchisor, you should lead with authority, but you can’t dictate. Franchisees should be allowed to have their ideas and suggestions heard and discussed. Your objective is to build a successful business with your franchisees, not as a result of them. Both the franchisor and the franchisee must gain from the relationship for it to flourish.

Franchisors must be committed to empowering and supporting others to succeed with their business model. You must be ready to let go of the reins and let other people drive your company forward. Good communication skills and the ability to encourage and support others are essential.

6. Sufficient resources to support a network of franchisees on a daily basis

Franchisees don’t just need support during the recruitment and onboarding process, you’ll need to have regular reviews with your franchisees to discuss their progress. You may need to provide updated documents, marketing materials, policies and even social media content to enable the network to run effectively. Consider whether you have the right team in place to support not just your existing company but a wider network of franchisees as well.

If your business ticks all these boxes, congratulations, you’re ready to franchise! If not, franchising could still be a future option, so don’t be afraid to ask for help in getting your business franchise ready – it could be the best decision you have ever made.